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CERECOR, INC. Index to Financial Statements

As filed with the Securities and Exchange Commission on October 9, 2015

Registration No. 333-204905


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Amendment No. 4
to

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

Cerecor Inc.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)
  2834
(Primary Standard Industrial
Classification Code Number)
  45-0705648
(I.R.S. Employer
Identification Number)

400 E. Pratt Street, Suite 606
Baltimore, Maryland 21202
(410) 522-8707

(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

Blake M. Paterson, M.D.
President and Chief Executive Officer
Cerecor Inc.
400 E. Pratt Street, Suite 606
Baltimore, Maryland 21202
(410) 522-8707

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Joanne R. Soslow, Esq.
Kevin S. Shmelzer, Esq.
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
(215) 963-5000

 

Mitchell S. Nussbaum, Esq.
Tahra T. Wright, Esq.
Loeb & Loeb LLP
345 Park Avenue
New York, NY 10154
(212) 407-4000

Approximate date of commencement of proposed sale to public:
As soon as practicable after this registration statement is declared effective.

         If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.    ý

         If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

         If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

         If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

         Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o   Accelerated filer o   Non-accelerated filer ý
(Do not check if a
smaller reporting company)
  Smaller reporting company o

         The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

   


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The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting offers to buy these securities in any state or other jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED OCTOBER 9, 2015.

PRELIMINARY PROSPECTUS

          4,230,769 Units

LOGO

         This is the initial public offering of our units, each of which consists of one share of our common stock, one Class A warrant to purchase one additional share of our common stock, or the Class A Warrants, and one Class B warrant to purchase one-half additional share of our common stock, or the Class B Warrants, and together with the Class A Warrants, the Warrants. We are offering 4,230,769 units in this offering. Prior to this offering, there has been no public market for our units, the Warrants or common stock. The initial public offering price of our units is expected to be between $6.00 and $7.00 per unit.

         Each of the Class A Warrants is exercisable on or before October             , 2018 to purchase one share of our common stock at an exercise price of $4.55 per share, assuming an initial public offering price of $6.50 per unit, which is the midpoint of the price range set forth on the cover page of this prospectus.

         Each of the Class B Warrants is exercisable on or before April             , 2017 to purchase one-half share of our common stock at an exercise price of $3.90 per full share, assuming an initial public offering price of $6.50 per unit, which is the midpoint of the price range set forth on the cover page of this prospectus.

         The components of the units will begin to trade separately on the first trading day following the 60th day after the effectiveness of the registration statement for this offering, unless Maxim Group LLC, as representative of the underwriters, determines that an earlier date is acceptable. In no event will separate trading of the securities comprising the units commence until the company issues a press release announcing when such separate trading will begin.

         We refer to the units, the shares of our common stock, the Warrants and the shares of our common stock underlying the Warrants, collectively, as the offered securities. The shares of our common stock, Class A Warrants, Class B Warrants and the units have been approved for listing on the NASDAQ Capital Market under the symbol "CERC", "CERCW", "CERCZ" and "CERCU", respectively, subject to notice of issuance.

         Investing in our common stock involves risks. See "Risk Factors" beginning on page 16 of this prospectus.

         We are an "emerging growth company" as that term is used in the Jumpstart Our Business Startups Act of 2012 and, as such, we have elected to comply with certain reduced public company disclosure requirements for this prospectus and future filings. See "Prospectus Summary—Implications of Being an Emerging Growth Company" on page 7 of this prospectus.

 
   
  Per Unit(1)   Total  

Initial public offering price

  $     $    

Underwriting discounts and commissions(2)

  $     $    

Proceeds to Cerecor (before expenses)

  $     $    

                               

                 
(1)
Each unit consists of one share of common stock, one Class A Warrant and one Class B Warrant.

(2)
We refer you to "Underwriting" beginning on page 196 of this prospectus for additional information regarding total underwriter compensation.

         We have granted a 45-day option to the underwriters, exercisable one or more times in whole or in part, to purchase up to an additional (i) 634,615 units or (ii) if Maxim Group LLC determines that the units shall detach and our shares of common stock and the warrants underlying the units shall begin to trade separately during such 45-day period, an additional 634,615 shares of common stock at a price of $6.49 per share and/or 634,615 additional Class A Warrants at a price of $0.005 per Class A Warrant and/or 634,615 additional Class B Warrants at a price of $0.005 per Class B Warrant less, in each case, the underwriting discounts and commissions, to cover over-allotments, if any.

         Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

         The underwriters expect to deliver the units to purchasers on or about                    , 2015.

Maxim Group LLC

Laidlaw & Company (UK) Ltd.

   

Prospectus dated                    , 2015


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        Neither we nor any of the underwriters has authorized anyone to provide you with information different from, or in addition to, that contained in this prospectus or any free writing prospectus we have prepared. If anyone provides you with different or inconsistent information, you should not rely on it. Neither we nor any of the underwriters is making an offer to sell or seeking offers to buy these securities in any jurisdiction where or to any person to whom the offer or sale is not permitted. The information in this prospectus is accurate only as of the date on the front cover of this prospectus and the information in any free writing prospectus that we may provide you in connection with this offering is accurate only as of the date of that free writing prospectus. Our business, financial condition, results of operations and future growth prospects may have changed since those dates.

        Through and including                        , 2015 (25 days after the commencement of this offering), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This delivery is in addition to a dealer's obligation to deliver a prospectus when acting as an underwriter and with respect to their unsold allotments or subscriptions.

        This prospectus includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information.

        For investors outside the United States: neither we nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus or any free writing prospectus we may provide to you in connection with this offering in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus and any such free writing prospectus outside of the United States.

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PROSPECTUS SUMMARY

        The following summary highlights information contained elsewhere in this prospectus and is qualified in its entirety by the more detailed information and financial statements included elsewhere in this prospectus. This summary does not contain all of the information that may be important to you. You should read and carefully consider the following summary together with the entire prospectus, including our financial statements and the notes thereto appearing elsewhere in this prospectus and the matters discussed in the sections in this prospectus entitled "Risk Factors," "Selected Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" before deciding to invest in our units. Some of the statements in this prospectus constitute forward-looking statements that involve risks and uncertainties. See "Special Note Regarding Forward-Looking Statements." Our actual results could differ materially from those anticipated in such forward-looking statements as a result of certain factors, including those discussed in the "Risk Factors" section and other sections of this prospectus.

        Except as otherwise indicated herein or as the context otherwise requires, references in this prospectus to "Cerecor," "the company," "we," "us" and "our" refer to Cerecor Inc.


Overview

        We are a clinical-stage biopharmaceutical company with the goal of becoming a leader in the development of innovative drugs that make a difference in the lives of patients with neurological and psychiatric disorders. We have a portfolio of clinical and preclinical compounds that we believe are best-in-class due to their unique mechanism of action and where human proof of concept has been established for the compound or the target. We are currently pursuing the regulatory approval of three product candidates: CERC-301, CERC-501 and CERC-406.

        CERC-301 is currently in Phase 2 development as an oral, adjunctive treatment of patients with major depressive disorder, or MDD, who are failing to achieve an adequate response to their current antidepressant treatment and are severely depressed. We received fast track designation by the United States Food and Drug Administration, or FDA, in November 2013 for CERC-301 for the treatment of MDD. CERC-301 belongs to a class of compounds known as antagonists, or inhibitors, of the N-methyl-D-aspartate, or NMDA, receptor, a receptor subtype of the glutamate neurotransmitter system that is responsible for controlling neurological adaptation. We believe CERC-301 will be a "first-in-class" medication that will cause a significant reduction in depression symptoms in a matter of days, as compared to weeks or months with conventional therapies, because it selectively blocks the NMDA receptor subunit 2B, or NR2B, which we believe provides rapid and significant antidepressant activity without the adverse side effect profile of non-selective NMDA receptor antagonists. We are also currently developing CERC-501, which is in Phase 2 development. We intend to first develop CERC-501 for adjunctive treatment of MDD and for substance use disorders (e.g., nicotine, alcohol, and/or cocaine). If we receive approval for CERC-501 for adjunctive treatment of MDD and for substance use disorders, we plan to further develop CERC-501 for the concurrent treatment of MDD and substance use disorders, or co-occurring disorders. CERC-501 was acquired in February 2015, and is a potent and selective kappa opioid receptor, or KOR, antagonist. KORs are believed to play key roles in modulating stress, mood and addictive behaviors, which form the basis of co-occurring disorders. We are preparing to initiate a clinical study to evaluate the effect of CERC-501 on aspects of tobacco withdrawal and reinstatement in the first half of 2016. In addition, we are considering conducting a Phase 2 clinical study in inadequately treated subjects with MDD currently on antidepressants, with an initiation date in the second half of 2016. Thereafter, we intend to pursue additional studies focused on substance use disorders, the adjunctive treatment of MDD and, depending on marketing approval, the treatment of co-occurring disorders. CERC-406 is our preclinical lead candidate from our proprietary platform of compounds that inhibit catechol-O-methyltransferase, or COMT, within the brain, which we refer to as our COMTi platform. We anticipate developing CERC-406 for the treatment of residual cognitive impairment symptoms in patients with MDD.

 

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        Members of our management team have extensive pharmaceutical product development and commercialization experience and they have played key roles in the development or commercialization of Prozac®, Zyprexa®, Lyrica®, Cymbalta®, Neurontin® and Abilify®, each of which is a neuroscience product that has generated over $1.0 billion of annual revenues. Collectively, our officers and directors have contributed to the submission of numerous Investigational New Drug Applications, or INDs, and nine New Drug Applications, or NDAs, to the FDA. Leveraging the experience of our management team, within the last 24 months we obtained IND clearance and received fast track designation for CERC-301 from the FDA, completed two clinical trials of CERC-301, selected CERC-406 as our preclinical lead candidate from our COMTi platform and, most recently, broadened our clinical pipeline by in-licensing CERC-501.


Product Candidates and Platform

Product Pipeline

        The following table summarizes key information about our three product candidates and further detail regarding each product candidate is provided under the heading "Business" in this prospectus:

Product Candidate / Platform
  Potential Indication(s)   Stage of Development   Anticipated Milestones
CERC-301   Adjunctive treatment of MDD with rapid onset   Phase 2   Data in the second half of 2016

CERC-501

 

Substance use disorders Adjunctive treatment of MDD
Co-occurring disorders

 

Phase 2

 

Data in the second half of 2016

CERC-406

 

Residual cognitive impairment symptoms in MDD

 

Preclinical

 

IND submission anticipated in the first half of 2017

CERC-301

        Depression is one of the most common serious medical and psychiatric disorders, with more than 150 million adults worldwide suffering from MDD at any given time, according to a 2003 report by the World Health Organization, or WHO, titled Investing in Mental Health. According to the IMS Institute for Healthcare Informatics' 2012 report titled The Use of Medicines in the United States: Review of 2011, over 264 million prescriptions totaling $11 billion were filled for depression in the United States in 2011. Nevertheless, many patients undergoing treatment with currently available pharmacologic MDD therapies experience delayed onset of therapeutic response, high rates of sub-optimal response, low rates of remission and treatment-limiting side effects.

        CERC-301, which we have licensed from Merck & Co., Inc. and its affiliates, or Merck, belongs to a class of compounds known as antagonists of the NMDA receptor. Research on ketamine, such as A Randomized Trial of an N-methyl-D-aspartate Antagonist in Treatment-Resistant Major Depression study conducted by Dr. Carlos A. Zarate, Jr. and others, has provided evidence that NMDA receptor antagonists can have significant antidepressant activity within 24 hours of administration and that this effect may be associated with a biomarker of neuronal growth. We believe efficacy of the class is further supported by the off-label use of ketamine throughout the United States as a rapid-acting antidepressant in treatment resistant bipolar depression and MDD. Ketamine is an anesthetic that is a non-selective NMDA receptor antagonist, is not approved as an antidepressant and has several significant limitations, including the need for repeated intravenous administration in a clinic and undesirable side effects such as increases in blood pressure and significant psychotomimetic effects, including intoxication and hallucinations.

 

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        We believe CERC-301 has potential competitive advantages over current treatments because it is orally administered and it selectively blocks the NR2B. An August 2012 study published by the National Institute of Mental Health, or NIMH, provides support for the potential competitive advantages of CERC-301 because it demonstrated that CERC-301 had a rapid onset of antidepressant effect in subjects with treatment resistant depression along with an increase in a biomarker commonly seen with an antidepressant effect, without many of the side effects commonly seen in non-selective NMDA receptor antagonists.

        In 2014 we completed an exploratory inpatient pharmacokinetic, or PK, and pharmacodynamics, or PD, study in healthy volunteers, which we refer to as the PK/PD study, and a Phase 2 outpatient efficacy study for the adjunctive treatment of patients with severe MDD who had recently experienced suicidal ideation. The PK/PD study provided evidence of safety and tolerability at daily doses up to 20 mg for seven days, along with apparent increases in the biomarker. In the Phase 2 study, CERC-301 was administered daily at a dose of 8 mg for 28 days, as an adjunctive treatment to subjects' current medications. While CERC-301 was well tolerated, there were no biomarker changes and the study failed to demonstrate any significant antidepressant effect, which we believe suggests that drug exposure was inadequate. Given the safety and tolerability of higher doses observed in the PK/PD study, we initiated a Phase 2 study utilizing higher doses and a revised dosing regimen, Clin301-203, in the third quarter of 2015 with results becoming available in the second half of 2016.

        Upon completion of Clin301-203, and dependent upon study results, we plan to conduct a multi-dose, six week Phase 2b study of CERC-301 as adjunctive treatment in subjects with MDD who are currently experiencing a severe depressive episode despite stable ongoing treatment with a serotonin reuptake inhibitor, or SSRI, or serotonin norepinephrine reuptake inhibitor, or SNRI. We expect to initiate this dose ranging study in the first half of 2017. Thereafter we plan to engage the FDA in an end-of-phase 2 meeting to align plans and activities for potential regulatory approval which would include Phase 3 clinical studies, non-clinical NDA enabling studies and manufacturing activities.

CERC-501

        Numerous studies have shown that many patients do not respond to their initial antidepressant therapy. For example, according to a 2006 report titled Acute and Longer-Term Outcomes in Depressed Outpatients Requiring One or Several Treatment Steps: A STAR-D Report, or the STAR-D Report, 51.4% of patients failed to respond, defined as achieving a 50% reduction in symptoms, and only 36.8% became symptom free, or achieved remission, after their initial 12-week treatment course with monoamine antidepressants. As such, physicians commonly will switch patients' antidepressants to manage depression, and patients may require two or three courses of treatment, before achieving satisfactory relief. The depression may persist following a course of treatment and additional medications may need to be used adjunctively. These adjunctive agents may include atypical antipsychotics, like aripiprazole and quetiapine, or other agents such as buproprion and lithium.

        Drug abuse is a major public health problem that impacts society on multiple levels. According to Results from the 2013 National Survey on Drug Use and Health, a survey conducted by the Substance Abuse and Mental Health Services Administration, in 2013, an estimated 21.6 million persons in the United States aged 12 or older (8.2 percent of the population) were classified with substance dependence or abuse in the past year based on criteria specified in the Diagnostic and Statistical Manual of Mental Disorders, 4th edition. Of these, 2.6 million were classified with dependence or abuse of both alcohol and illicit drugs, 4.3 million had dependence or abuse of illicit drugs but not alcohol, and 14.7 million had dependence or abuse of alcohol but not illicit drugs. Illicit drugs include marijuana/hashish, cocaine (including crack), heroin, hallucinogens, inhalants, or prescription-type psychotherapeutics (pain relievers, tranquilizers, stimulants, and sedatives) used nonmedically. Furthermore, in 2013, heavy drinking was reported by 6.3 percent of the United States population aged 12 or older, or 16.5 million people. Cigarette smoking and exposure to tobacco smoke are the

 

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leading causes of preventable disease and death in the United States, resulting in more than 480,000 premature deaths and $289 billion in direct health care expenditures and productivity losses each year. In 2013, 55.8 million persons (21.3 percent of the population) were current cigarette smokers. Despite progress over the past several decades, millions of adults still smoke cigarettes, the most commonly used tobacco product in the United States, and this continues to be major public health problem.

        Mood, anxiety and substance use disorders, such as nicotine and alcohol dependence, are highly co-morbid in humans. Greater than 150 million adults worldwide suffer from MDD at any given time, according to a 2003 report by WHO titled Investing In Mental Health, and, according to the United States National Comorbidity Survey Replication, or NCS-R, more than 16 million adults in the United States, which represents approximately 6.7% of its entire adult population, will suffer from a MDD episode in a 12 month period. One common link between the co-occurrence of depression and substance use disorders may be stress. Sustained stressful experiences can induce despair and increase the risk of clinical depression and substance use. Substance use often provides relief from stress, such that the substance of abuse often becomes a potent behavioral reinforcer. Present pharmacologic treatments for co-occurring psychiatric and substance use disorders, or co-occurring disorders, consist either of treatment for the psychiatric disorder or the treatment for the addiction, but not the treatment of the underlying connection between the two. Therefore, we believe a tremendous need exists for pharmacotherapies effective in the treatment of co-occurring disorders.

        In February 2015, we acquired rights to CERC-501, through an exclusive, worldwide, license from Eli Lilly and Company. CERC-501 is a high-binding, selective antagonist of KORs in the brain. KORs are localized in areas of the brain which effect reward and stress and are believed to impact mood, stress and addictive disorders. Preclinical data to date support the emerging consensus that selective kappa opioid antagonists have antidepressant and antianxiety like effects, reduce addictive substance consumption, and reduce behaviors and signs of drug withdrawal. As these studies demonstrate efficacy in animal models of both mood and addictive disorders, we believe that these studies provide the basis for the use of KOR antagonists in mood and substance use disorders and have the potential to reduce co-morbid mood disorders. We believe that the rationale for CERC-501 as an adjunctive treatment in MDD is supported by the reported Phase 2 results of Alkermes plc's, or Alkermes, investigational drug ALKS-5461, which is believed to be acting as a functional kappa antagonist. Alkermes has reported positive Phase 2 results for ALKS-5461 as an adjunctive antidepressant in MDD subjects and has initiated a Phase 3 development program. According to a press release by Alkermes, "ALKS-5461 had an onset of effect, as measured by MADRS, evident after one week of treatment." This suggests a rapid response to antidepressant treatment but not as rapid as what has been reported in the ketamine depression clinical trials.

        For approximately the next 24 months, we expect to evaluate the potential human utility of CERC-501 in smoking dependence, depression, cocaine dependence, and anhedonia and mood disorders. The depression and anhedonia and mood studies are being performed in academic centers, under the auspices of the NIMH. We will be conducting the smoking study, which we refer to as Clin501-201. In addition, we are considering conducting a Phase 2 clinical study in inadequately treated subjects with MDD currently on antidepressants, with an initiation date in the second half of 2016. Thereafter, we intend to pursue additional studies focused on substance use disorders, the adjunctive treatment of MDD and, depending on marketing approval, the treatment of co-occurring disorders. We believe competitively positioning CERC-501 as a treatment of substance use disorders, a once-a-day, oral adjunctive treatment of MDD, and, depending on marketing approval, a treatment for co-occurring disorders it has the potential to generate widespread market acceptance. We further believe that, if CERC-501 has the ability to provide rapid onset of antidepressant effect, the market opportunity will be further expanded.

 

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COMTi Platform

        In March 2013, we acquired rights to our COMTi platform by means of an exclusive, worldwide license from Merck. Our COMTi platform consists of a library of approximately 1,800 compounds that we believe may penetrate the nervous system and preferentially inhibit COMT in the brain. COMT is an enzyme that breaks down dopamine and its inhibition has demonstrated applicability in treating certain neuropsychiatric conditions, including schizophrenia, Parkinson's disease and pathological gambling. We believe potent, brain-specific COMT inhibitors will selectively increase dopamine levels in the prefrontal cortex, which is the region of the brain that is responsible for verbal learning, working memory, attention tasks and decision making, thereby improving executive function. Moreover, our development efforts are specifically focused on a new generation of potent COMT inhibitors that we believe avoid off-target toxicity and side effects, such as liver toxicity and diarrhea, which are often seen with the previous generation of inhibitors, such as tolcapone and entacapone.

    CERC-406

        In January 2015, we selected CERC-406 as our first preclinical lead candidate from the COMTi platform. In 2015 and 2016, we intend to establish the data set necessary to select additional preclinical lead candidates and to initiate programs for treatment of various conditions where impaired executive function is a core symptom. These programs will target the improvement of working memory and executive function, which are key components of cognition.

        CERC-406 is a small molecule, that research indicates is a selective COMT inhibitor with low inhibitory activity on peripheral COMT. We anticipate developing CERC-406 as a "first-in-class," oral adjunctive medication for patients with residual cognitive impairment symptoms suffering from MDD. We selected CERC-406 as our preclinical lead candidate from our COMTi platform because in preclinical testing it demonstrated lower potential of peripheral, off target side effects, rapid absorption and bioavailability, good brain penetration and a favorable dose-dependent biomarker profile in rats. CERC-406 has also demonstrated off-rate on brain COMT that is slower than tolcapone, implying good duration of effect. Finally, CERC-406 has demonstrated a favorable safety profile in all studies conducted to date. In preliminary studies it appears that CERC-406 may have favorable drug distribution and metabolism properties, suggesting that it has the potential to be administered orally on a once or twice daily basis. We plan to file an IND for CERC-406 in the first half of 2017 and, upon acceptance of this IND filing, we will commence Phase 1 studies to examine human safety, tolerability and pharmacokinetics that will determine suitability for further development.


Our Strategy

        Our goal is to be a leader in the development of innovative drugs that make a difference in the lives of patients with neurological and psychiatric disorders. Our strategic objectives include:

    rapidly advancing the clinical development of CERC-301;

    rapidly advancing the clinical development of CERC-501;

    advancing CERC-406 into IND-enabling studies;

    using our COMTi platform to build a pipeline of future product candidates for conditions where impaired executive function is a core symptom;

    establishing collaborations to maximize value; and

    expanding our product candidate portfolio through in-licensing and strategic acquisitions.

 

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Management

        Members of our management team have extensive pharmaceutical product development and commercialization experience and they have played key roles in the development or commercialization of Prozac®, Zyprexa®, Lyrica®, Cymbalta®, Neurontin® and Abilify®, each of which is a neuroscience product that has generated over $1.0 billion of annual revenues. Collectively, our directors and officers have contributed to the submission of numerous Investigational New Drug Applications, or INDs, and nine NDAs to the FDA. Leveraging the experience of our management team, we obtained IND clearance and received fast track designation for CERC-301 from the FDA, completed two clinical trials of CERC-301, selected CERC-406 as the initial candidate from our COMTi platform and, most recently, broadened our clinical pipeline by in-licensing CERC-501.


Risks Associated with Our Business

        Our ability to implement our business strategy is subject to numerous risks and uncertainties that you should be aware of before making an investment decision. As a clinical-stage biopharmaceutical company, we face many risks inherent in our business and our industry generally. You should carefully consider all of the information set forth in this prospectus and, in particular, the information under the heading "Risk Factors," prior to making an investment in our common stock. These risks include, among others, the following:

    we have not received, and we may not receive, regulatory approval for CERC-301, CERC-501 or any other product candidates;

    we have no source of predictable revenue and have incurred significant operating losses since inception which has raised substantial doubt regarding our ability to continue as a going concern and has resulted in our independent registered public accounting firm including an explanatory paragraph in its report on our financial statements as of and for the year ended December 31, 2014 with respect to our ability to continue as a going concern;

    we may never become profitable and we may incur substantial and increasing net losses for the foreseeable future as we continue development of, seek marketing approvals for and begin to commercialize our product candidates and, as of June 30, 2015, we had an accumulated deficit of $49.2 million;

    we will need to obtain additional funding to continue operations, which may not be available to us on acceptable terms, or at all;

    our success is primarily dependent on the successful development, marketing approval and commercialization of our product candidates, all of which are in early development;

    if clinical trials of our product candidates fail to demonstrate safety and efficacy or do not otherwise produce positive results, such as the failure of our discontinued product candidate, FP01, to meet the primary endpoint in two Phase 2 studies and the failure of CERC-301 to meet the primary endpoint in one Phase 2 study, we may be unable to obtain marketing approvals and commercialize our product candidates;

    we are subject to marketing approval processes that are lengthy, expensive, time-consuming and unpredictable;

    the third-party coverage and reimbursement status of our product candidates is uncertain, and failure to obtain or maintain adequate coverage and reimbursement for products could limit our ability to market those products and decrease our ability to generate revenue;

 

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    we must obtain state manufacturer and/or wholesaler licenses for the sale and distribution of our products into each state, and if we are delayed in obtaining these state licenses, or denied the licenses, even with FDA approval, we would not be able to sell or ship product into that state;

    we may be unable to recruit or retain key employees, including our senior management team, which may prevent us from successfully developing and commercializing our product candidates or otherwise implementing our business plan;

    we may not be able to obtain and enforce patent rights or other intellectual property rights that cover our product candidates and that are of sufficient breadth to prevent third parties from competing against us; and

    we depend on the performance of third parties, including contract research organizations and third-party manufacturers.


Our Corporate Information

        We were incorporated as Ceregen Corporation in Delaware on January 31, 2011, and we subsequently changed our name to Cerecor Inc. Our principal executive offices are located at 400 E. Pratt Street, Suite 606, Baltimore, Maryland 21202 and our telephone number is (410) 522-8707. Our website address is www.cerecor.com. The information contained on, or that can be accessed through, our website is not a part of this prospectus. We have included our website address in this prospectus solely as an inactive textual reference.

        The trademarks, trade names and service marks appearing in this prospectus are the property of their respective owners. We do not intend our use or display of other companies' trademarks, trade names or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other companies or products.


Implications of Being an Emerging Growth Company

        As a company with less than $1.0 billion in revenue during our last fiscal year, we qualify as an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from specified disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include:

    being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced "Management's Discussion and Analysis of Financial Condition and Results of Operations" disclosure;

    not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting;

    not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements;

    reduced disclosure obligations regarding executive compensation; and

    exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

        We may take advantage of these provisions for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company if we have more than $1.0 billion in annual revenues, have more than $700.0 million in market value of our capital

 

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stock held by non-affiliates or issue more than $1.0 billion of non-convertible debt over a three-year period. We may choose to take advantage of some, but not all, of the available exemptions. We have taken advantage of some reduced reporting burdens in this prospectus. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock.

        In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

 

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THE OFFERING

Securities offered hereby

  4,230,769 units, each consisting of one share of our common stock, one Class A Warrant and one Class B Warrant

Units outstanding before this offering

 

0 units

Units to be outstanding after this offering

 

4,230,769 units

Common stock to be outstanding immediately following this offering

 

8,860,912 shares

Class A Warrants outstanding before this offering

 

0 Class A Warrants

Class A Warrants to be outstanding after this offering

 

4,230,769 Class A Warrants

Class B Warrants outstanding before this offering

 

0 Class B Warrants

Class B Warrants to be outstanding after this offering

 

4,230,769 Class B Warrants

Terms of the Class A Warrants

 

The exercise price of the Class A Warrants is $4.55, assuming an initial public offering price of $6.50 per unit, which is the midpoint of the price range set forth on the cover page of this prospectus.

 

Each Class A Warrant is exercisable for one share of common stock, subject to adjustment as described therein. A holder may not exercise any portion of a Class A Warrant to the extent that the holder, together with its affiliates and any other person or entity acting as a group, would own more than 4.99% of the outstanding common stock after exercise, as such percentage ownership is determined in accordance with the terms of the Class A Warrants, except that upon at least 61 days' notice from the holder to us, the holder may waive such limitation.

 

Each Class A Warrant will be exercisable on the date when the units detach and the components begin to trade separately and will expire on October     , 2018, or earlier upon redemption. We may, in our sole discretion, extend the duration of the Class A Warrants by delaying the expiration date upon not less than 20 days' notice to registered holders of the Class A Warrants.

 

The terms of the Class A Warrants will be governed by the Class A Warrant Agreement, dated October     , 2015 between us and American Stock Transfer & Trust Company, LLC, or the Warrant Agent. See "Description of Securities—Class A Warrants."

 

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Terms of the Class B Warrants

 

The exercise price of the Class B Warrants is $3.90 per full share, assuming an initial public offering price of $6.50 per unit, which is the midpoint of the price range set forth on the cover page of this prospectus.

 

Each Class B Warrant is exercisable for one-half share of common stock, subject to adjustment as described therein. A holder may not exercise any portion of a Class B Warrant to the extent that the holder, together with its affiliates and any other person or entity acting as a group, would own more than 4.99% of the outstanding common stock after exercise, as such percentage ownership is determined in accordance with the terms of the Class B Warrants, except that upon at least 61 days' notice from the holder to us, the holder may waive such limitation.

 

Each Class B Warrant will be exercisable on the date the units detach and the components begin to trade separately and will expire on April     , 2017. We may, in our sole discretion, extend the duration of the Class B Warrants by delaying the expiration date upon not less than 20 days' notice to registered holders of the Class B Warrants. The terms of the Class B Warrants will be governed by the Class B Warrant Agreement dated October     , 2015 between us and the Warrant Agent. See "Description of Securities—Class B Warrants."

Redemption of the Class A Warrants

 

From and after one year following their issuance, we may call the outstanding Class A Warrants, in whole and not in part, for redemption (i) at a price of $0.001 per Class A Warrant, so long as a registration statement relating to the common stock issuable upon exercise of the Class A Warrants has been effective and current during the 30 consecutive trading day period described below; (ii) upon not less than 30 days prior written notice of redemption; and (iii) if, and only if, the last reported sale price of a share of our common stock equals or exceeds 200% of the Class A Warrant exercise price, (subject to adjustment for splits, dividends, recapitalizations and other similar events) for any 20 trading days within a 30 consecutive trading day period ending three business days before we send the notice of redemption to holders of the Class A Warrants.

 

If the foregoing conditions are satisfied and we call the Class A Warrants for redemption, each Class A Warrant holder will then be entitled to exercise his, her or its Class A Warrant prior to the date scheduled for redemption. However, there can be no assurance that the price of the shares of our common stock will exceed the Class A Warrant exercise price after the redemption call is made.

Redemption of the Class B Warrants

 

We may not call the Class B Warrants for redemption.

 

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Over-allotment option

 

We have granted a 45-day option to the underwriters, exercisable one or more times in whole or in part, to purchase up to an additional (i) 634,615 units or (ii) if Maxim Group LLC determines that the units shall detach and our shares of common stock and the warrants underlying the units shall begin to trade separately during such 45-day period, 634,615 shares of common stock at a price of $6.49 per share and/or 634,615 additional Class A Warrants at a price of $0.005 per Class A Warrant and/or 634,615 additional Class B Warrants at a price of $0.005 per Class B Warrant less, in each case, the underwriting discounts and commissions, to cover over-allotments, if any.

Use of proceeds

 

We estimate that the net proceeds from this offering will be approximately $22.7 million, or approximately $26.5 million if the underwriters exercise their over-allotment option in full, based on an assumed initial public offering price of $6.50 per unit, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We intend to use the net proceeds from this offering, together with our existing cash and cash equivalents, to fund the costs of Phase 2 clinical development of CERC-301 and CERC-501, preclinical research for CERC-406, research and development to build our COMTi platform and potential in licensing or other acquisitions and for working capital and general corporate purposes. See "Use of Proceeds."

Risk Factors

 

You should read the "Risk Factors" section of this prospectus beginning on page 16 for a discussion of factors to consider carefully before deciding to invest in the offered securities.

Approved NASDAQ Capital Market symbol for the shares of common stock, Class A Warrants, Class B Warrants, and the units, respectively

 

"CERC," "CERCW," "CERCZ" and "CERCU"

Trading commencement and separation of common shares and Warrants

 

We expect that the shares of our common stock, the Class A Warrants and the Class B Warrants, collectively, will begin trading on or promptly after the date of this prospectus in the form of units. The components of the units will begin to trade separately on the first trading day following the 60th day after the effectiveness of the registration statement for this offering, unless Maxim Group LLC, as representative of the underwriters, determines that an earlier date is acceptable. In no event will separate trading of the securities comprising the units commence until the company issues a press release announcing when such separate trading will begin, at which time trading of the units will be suspended, the units will be de-listed and only shares of our common stock, Class A Warrants and Class B Warrants will be listed for trading.

 

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        The number of shares of our common stock to be outstanding after this offering is based on 649,721 shares of our common stock outstanding as of June 30, 2015 and includes 3,980,422 shares of our common stock issuable upon the automatic conversion of all outstanding shares of our convertible preferred stock.

        The number of shares of our common stock to be outstanding immediately following this offering excludes:

    510,884 shares of our common stock issuable upon the exercise of stock options outstanding as of June 30, 2015, at a weighted-average exercise price of $8.88 per share;

    490,756 shares of our common stock issuable upon the exercise of warrants outstanding as of June 30, 2015 at a weighted-average exercise price of $26.32 per share, which warrants are expected to remain outstanding upon the closing of this offering in accordance with their terms;

    166,718 shares of our common stock issuable upon the exercise of warrants outstanding as of June 30, 2015 at a weighted-average exercise price of $8.40 per share, which warrants will expire upon the closing of this offering in accordance with their terms, unless exercised prior thereto;

    22,328 shares of our common stock issuable upon the exercise of the warrant outstanding as of June 30, 2015 at an exercise price of $8.40 per share, which warrant is exercisable to purchase shares of Series B convertible preferred stock prior to the completion of this offering, and which warrant is expected to remain outstanding upon the closing of this offering;

    the 4,230,769 shares of our common stock issuable upon exercise of the Class A Warrants sold in this offering;

    the 2,115,384 shares of our common stock issuable upon exercise of the Class B Warrants sold in this offering;

    105,767 shares of our common stock issuable upon the exercise of the unit purchase options issued in connection with this offering to the underwriters, assuming a total of 4,230,769 units are sold in this offering and the exercise of the underwriters' class A warrants and the underwriters' class B warrants issued as a components of the unit purchase options at an exercise price of $5.23 and $4.49 per full share, respectively, assuming an initial public offering price of $6.50 per unit, which is the midpoint of the price range set forth on the cover page of this prospectus;

    254,236 shares of our common stock available for future issuance under our 2011 Stock Incentive Plan as of June 30, 2015, which upon effectiveness of our 2015 Omnibus Incentive Compensation Plan will be available for issuance under our 2015 Omnibus Incentive Compensation Plan; and

    890,815 shares of our common stock available for future issuance under our 2015 Omnibus Incentive Compensation Plan, which will become effective upon the business day immediately preceding the date on which the registration statement is declared effective.

        Unless otherwise indicated, all information in this prospectus assumes or gives effect to:

    a 1 for 28 reverse stock split of our common stock effected on September 1, 2015;

    no exercise of the outstanding options or warrants described above;

    the warrants outstanding as of June 30, 2015 to purchase an aggregate of 490,756 shares of our common stock at a weighted-average exercise price of $26.32 per share, which warrants will remain outstanding upon the closing of this offering in accordance with their terms;

 

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    the warrant outstanding as of June 30, 2015 to purchase 625,208 shares of Series B preferred stock has become, in accordance with its terms, a warrant to purchase 22,328 shares of common stock at an exercise price of $8.40 per share upon the closing of this offering;

    no exercise by the underwriters of their option to either (i) 634,615 units (and the common stock underlying such units) or (ii) 634,615 shares of common stock and/or 634,615 Class A Warrants and/or 634,615 Class B Warrants (and common stock underlying such Warrants), as a component of the units, to cover over-allotments;

    the conversion of all outstanding shares of our convertible preferred stock into an aggregate of 3,980,422;

    the amendment and restatement of our certificate of incorporation and bylaws upon the closing of this offering; and

    on a pro forma basis to give effect to the reclassification of approximately $1.5 million related to the Investor rights obligation and warrant liability from liabilities to permanent equity upon the closing of this offering.

 

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SUMMARY FINANCIAL DATA

        The following tables set forth our summary financial data for the periods indicated. The following summary financial data for the years ended December 31, 2013 and 2014 are derived from our audited financial statements appearing elsewhere in this prospectus. The following summary financial data for the six-month periods ended June 30, 2014 and 2015 and the selected balance sheet data as of June 30, 2015 are derived from our unaudited financial statements appearing elsewhere in this prospectus.

        This summary financial data should be read together with the historical financial statements and related notes to those statements, as well as "Management's Discussion and Analysis of Financial Condition and Results of Operations," which are included elsewhere in this prospectus. See note 3 to our audited financial statements appearing elsewhere in this prospectus for information regarding computation of basic and diluted net loss per share of common stock, unaudited pro forma basic and diluted net loss per share of common stock and the unaudited pro forma weighted average basic and diluted common shares outstanding used in computing pro forma basic and diluted net loss per common share.

 
  Years Ended December 31,   Six Months Ended June 30,  
 
  2013   2014   2014   2015  

Operating expenses:

                         

Research and development

  $ 8,914,084   $ 12,240,535   $ 5,610,764   $ 3,598,606  

General and administrative

    4,020,364     4,875,030     1,673,573     1,776,817  

Total operating expenses

    12,934,448     17,115,565     7,284,337     5,375,423  

Loss from operations

    (12,934,448 )   (17,115,565 )   (7,284,337 )   (5,375,423 )

Other income (expense):

                         

Change in fair value of warrant liabilities and investor rights obligation

    (121,115 )   2,266,161     385,990     (337,739 )

Interest income (expense), net

    10,555     (1,206,187 )   (794,038 )   (437,302 )

Total other income (expense):

    (110,560 )   1,059,974     (408,048 )   (775,041 )

Net loss

   
(13,045,008

)
 
(16,055,591

)
 
(7,692,385

)
 
(6,150,464

)

Net loss attributable to common stockholders

  $ (13,126,972 ) $ (3,521,153 ) $ (7,692,385 ) $ (6,150,464 )

Net loss per share of common stock, basic and diluted

  $ (20.72 ) $ (5.48 ) $ (12.10 ) $ (9.47 )

Weighted-average shares of common stock outstanding, basic and diluted

    633,669     642,052     635,714     649,721  

Pro forma net loss per share of common stock—basic and diluted (unaudited)

        $ (1.01 )       $ (1.33 )

Pro forma weighted-average shares of common stock outstanding, basic and diluted (unaudited)

          3,501,768           4,630,143  

        The following table presents our summary balance sheet data:

    on an actual basis as of June 30, 2015;

    on a pro forma basis to give effect to (i) the automatic conversion of all outstanding shares of our convertible preferred stock into an aggregate of 3,980,422 shares of our common stock and (ii) the reclassification of approximately $1.5 million related to the investor rights obligation and warrant liability from liabilities to permanent equity upon the closing of this offering; and

 

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    on a pro forma as adjusted basis to give further effect to our sale of 4,230,769 units in this offering at an assumed initial public offering price of $6.50 per unit, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Additionally, the pro forma as adjusted basis assumes the Warrants sold in this offering will be accounted for as equity instruments.

The pro forma as adjusted information presented in the summary balance sheet data is illustrative only and will change based on the actual initial public offering price and other terms of this offering determined at pricing. Each $1.00 increase or decrease in the assumed initial public offering price of $6.50 per unit, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease each of cash and cash equivalents, total assets and total stockholders' equity (deficit) on a pro forma as adjusted basis by approximately $3.9 million, assuming that the number of units offered by us, as set forth on the cover page of this prospectus, remains the same. Similarly, each increase or decrease of 1.0 million units offered by us at the assumed initial public offering price would increase or decrease each of cash and cash equivalents, total assets and total stockholders' equity (deficit) on a pro forma as adjusted basis by approximately $5.9 million.

 
  As of June 30, 2015  
 
  Actual   Pro forma   Pro forma as
adjusted
 
 
   
  (unaudited)
  (unaudited)
 

Cash and cash equivalents

  $ 6,143   $ 6,143   $ 28,854  

Total assets

    7,582     7,582     30,293  

Total liabilities

    11,426     9,906     9,906  

Convertible preferred stock

    28,346          

Total stockholders' equity (deficit)

    (32,189 )   (2,324 )   20,387  

 

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RISK FACTORS

        Investing in the offered securities involves a high degree of risk. Before making your decision to invest in the offered securities, you should carefully consider the risks described below, together with the other information contained in this prospectus, including our financial statements and the related notes appearing at the end of this prospectus. We cannot assure you that any of the events discussed below will not occur. These events could have a material and adverse impact on our business, results of operations, financial condition, cash flows and future growth. If that were to happen, the trading price of our units or the underlying securities could decline, and you could lose all or part of your investment.

Risks Related to Our Financial Position and Capital Needs

We have incurred significant net losses in every period since our inception and anticipate that we will continue to incur net losses in the future.

        We are a clinical-stage biotechnology company with a limited operating history. Investment in biopharmaceutical product development is highly speculative because it entails substantial upfront capital expenditures and significant risk that any potential product candidate will fail to demonstrate an adequate effect or acceptable safety profile, gain marketing approval and become commercially viable. To date, we have financed our operations primarily through private placements of our common and convertible preferred stock and convertible debt. We have no products approved for commercial sale and have not generated any revenue from product sales to date, and we continue to incur significant research and development and other expenses related to our ongoing operations. As a result, we are not profitable and have incurred significant losses in each period since our inception in 2011. For the years ended December 31, 2013 and 2014, and the six-month period ended June 30, 2015, we reported a net loss of $13.0 million, $16.1 million and $6.2 million, respectively. As of June 30, 2015, we had an accumulated deficit of $49.2 million. Substantially all of our operating losses have resulted from costs incurred in connection with our research and development program and from general and administrative costs associated with our operations.

        We expect to continue to incur significant losses for the foreseeable future, and we expect these losses to increase as we continue our research and development of, and seek marketing approvals for, our product candidates. If we do not successfully develop and obtain marketing approval for our product candidates and effectively market and sell any product candidates that are approved, we may never generate product sales. Even if we do generate product sales, we may never achieve or sustain profitability on an annual basis. Furthermore, following this offering, we expect to incur additional costs associated with operating as a public company. We may also encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenues. Our prior losses and expected future losses have had and will continue to have an adverse effect on our stockholders' equity and working capital.

We currently have no source of product revenue and may never become profitable.

        Our ability to generate product revenue and achieve profitability depends on our ability, alone or with partners, to successfully complete the development of, and obtain the marketing approvals necessary to commercialize, our product candidates. To date, we have not generated any revenues from commercialization of our product candidates and we do not know when, or if, we will generate any such revenues. Our ability to generate product revenue and ultimately become profitable depends upon our ability, alone or partnered, to successfully commercialize products, including any of our current product candidates or other product candidates that we may develop, in-license or acquire in the future. We do not anticipate generating revenue from the sale of products for the foreseeable future.

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Our ability to generate future product revenue from our current or future product candidates also depends on a number of additional factors, including our ability to:

    successfully complete research and clinical development of current and future product candidates;

    seek and obtain marketing approvals for product candidates for which we complete clinical trials;

    establish and maintain supply and manufacturing relationships with third parties, and ensure adequate and legally compliant manufacturing of bulk drug substances and drug products to maintain that supply;

    launch and commercialize product candidates for which we obtain marketing approval, if any, and if launched independently or under a co-promotion agreement, successfully establish a sales force, marketing and distribution infrastructure;

    identify and validate new product candidates;

    obtain coverage and adequate product reimbursement from third-party payors, including government payors;

    achieve market acceptance for our or our partners' products, if any;

    implement additional internal systems and infrastructure as needed;

    negotiate favorable terms in any collaboration, licensing or other arrangements into which we may enter;

    address any competing technological and market developments;

    establish, maintain and protect our intellectual property rights, including patents, trade secrets and know-how; and

    attract, hire and retain qualified personnel.

        In addition, because of the numerous risks and uncertainties associated with biopharmaceutical product development, including that our product candidates may not advance through development or achieve the endpoints of applicable clinical trials, we are unable to predict the timing or amount of increased expenses. In addition, our expenses could increase beyond expectations if we decide to or are required by the United States Food and Drug Administration, or FDA, or foreign regulatory authorities to perform studies or trials in addition to those that we currently anticipate. Even if we complete the development and regulatory processes described above, we anticipate incurring significant costs associated with launching and commercializing these products, which may not gain market acceptance or achieve commercial success.

        Even if we generate revenues from the sale of any of our products that may be approved, we may not become profitable and may need to obtain additional funding to continue operations. If we fail to become profitable or do not sustain profitability on a continuing basis, then the market price of our common stock could be depressed and we may be unable to raise capital, expand our business, diversify our product offerings, including obtaining new product candidates, or otherwise continue our operations at planned levels and be forced to reduce our operations. We do not know if or when we will achieve or maintain profitability.

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Even if this offering is successful, we will require additional capital to finance our operations, which may not be available to us on acceptable terms, or at all. Failure to obtain this necessary capital when needed may force us to delay, limit or terminate our product development efforts or other operations.

        As a research and development company, our operations have consumed substantial amounts of cash since inception. Identifying potential product candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we expect our research and development expenses to increase substantially in connection with our ongoing activities, particularly as we advance our product candidates into clinical trials or obtain and advance additional product candidates. We estimate that the net proceeds from this offering will be approximately $22.7 million, based on an assumed initial public offering price of $6.50, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We believe that the net proceeds from this offering, together with our existing cash and cash equivalents, will fund our projected operating requirements into the fourth quarter of 2016. See "Use of Proceeds." However, circumstances may cause us to consume capital more rapidly than we currently anticipate. For example, as we move our product candidates CERC-301 and CERC-501 through clinical trials, we may fail to meet our primary or secondary endpoints, which occurred for our first Phase 2 study for CERC-301, requiring us to complete more trials than originally expected or we may discover serious adverse side effects. Moreover, as we move our COMT inhibitor, or COMTi, product candidates, such as CERC-406, through preclinical studies, submit Investigational New Drug Applications, or INDs, and initiate clinical trials, we may produce adverse results requiring us to find new product candidates. Any of these events may increase our development costs more than we expect. We may need to raise additional funds or otherwise obtain funding through collaborations if we choose to initiate additional clinical trials for product candidates. In any event, we will require additional capital to obtain marketing approval for, and to commercialize, future product candidates.

        If we need to secure additional financing, such additional fundraising efforts may divert our management from our day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. If we do not raise additional capital when required or on acceptable terms, we may need to:

    significantly delay, scale back or discontinue the development or commercialization of one or more of our product candidates or cease operations altogether;

    seek strategic alliances for research and development programs at an earlier stage than we would otherwise desire or on terms less favorable than might otherwise be available; or

    relinquish, or license on unfavorable terms, our rights to technologies or any future product candidates that we otherwise would seek to develop or commercialize ourselves.

        If we need to conduct additional fundraising activities and we do not raise additional capital in sufficient amounts or on terms acceptable to us, we may be prevented from pursuing development and commercialization efforts, which will have a material adverse effect on our business, financial condition, results of operations and prospects.

        Our forecast of the period of time through which our financial resources will adequately support our operations is a forward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors, including the factors discussed elsewhere in this "Risk Factors" section. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect.

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        Our future funding requirements, both short and long term, will depend on many factors, including:

    the initiation, progress, timing, costs and results of preclinical and clinical studies for our product candidates and future product candidates we may develop;

    the outcome, timing and cost of seeking and obtaining regulatory approvals from the FDA and comparable foreign regulatory authorities, including the potential for such authorities to require that we perform more studies than we currently expect to perform;

    the cost to establish, maintain, expand and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, in connection with licensing, preparing, filing, prosecuting, defending and enforcing any patents or other intellectual property rights;

    the effect of competing technological and market developments;

    market acceptance of any approved product candidates;

    the costs of acquiring, licensing or investing in additional businesses, products, product candidates and technologies;

    the cost and timing of selecting, auditing and potentially validating a manufacturing site for commercial-scale manufacturing; and

    the cost of establishing sales, marketing and distribution capabilities for our product candidates for which we may receive marketing approval and that we determine to commercialize ourselves or in collaboration with our partners.

        If a lack of available capital results in our inability to expand our operations or otherwise capitalize on our business opportunities, our business, financial condition and results of operations could be materially adversely affected.

Raising additional capital may cause dilution to our existing stockholders or restrict our operations.

        Until we can generate a sufficient amount of revenue from our products, if ever, we expect to finance future cash needs through public or private equity or debt offerings. Additional capital may not be available on reasonable terms, if at all. If we raise additional funds through the issuance of additional debt or equity securities, such raises could result in dilution to our existing stockholders and/or increased fixed payment obligations. Furthermore, these securities may have rights senior to the offered securities and could contain covenants that would restrict our operations and potentially impair our competitiveness, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. Any of these events could significantly harm our business, financial condition and prospects.

Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

        Under Section 382 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an "ownership change," generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period, the corporation's ability to use its pre-change federal net operating loss carryforwards, or NOLs, and other pre-change federal tax attributes (such as research tax credits) to offset its post-change income may be limited. We may experience ownership changes in the future as a result of the closing of this offering and subsequent shifts in our stock ownership. State NOL carryforwards may be similarly or more stringently limited. As a result, if we earn net taxable income,

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our ability to use our pre-change NOLs to offset United States federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to us.

In connection with the reporting of our financial condition and results of operations, we are required to make estimates and judgments which involve uncertainties, and any significant differences between our estimates and actual results could have an adverse impact on our financial position, results of operations and cash flows.

        Our discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States, or GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, expenses and revenues and related disclosure of contingent assets and liabilities. For example, we estimate clinical trial costs incurred using subject data and information from our contract research organizations, or CROs. If we underestimate or overestimate these expenses, adjustments to expenses may be necessary in future periods. Any significant differences between our actual results and our estimates and assumptions could negatively impact our financial position, results of operations and cash flows.

Our limited operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability.

        We commenced active operations in the second quarter of 2011 and our operations to date have included organizing and staffing our company, business planning, raising capital and developing our product candidates and platform. Two of our product candidates, CERC-301 and CERC-501, are currently in Phase 2 development and we anticipate receipt of data in the second half of 2016 from the Phase 2 studies we are initiating for each product candidate. We have not yet, however, demonstrated our ability to successfully obtain marketing approvals, manufacture a commercial scale product or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization. Consequently, any predictions you make about our future success or viability may not be as accurate as they could be if we had a longer operating history.

        In addition, as an early stage business, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors. We will need to transition at some point from a company with a research and development focus to a company capable of supporting commercial activities. We may not be able to successfully complete such a transition.

        We expect our financial condition and operating results to continue to fluctuate significantly from quarter-to-quarter and year-to-year due to a variety of factors, many of which are beyond our control. Accordingly, you should not rely upon the results of any quarterly or annual periods as indications of future operating performance.

We may engage in in-licensing acquisitions or other strategic transactions that could impact our liquidity, increase our expenses and divert a significant amount of our management's time.

        Since inception, we have in-licensed each of our product candidates and our COMTi platform. From time to time we may consider additional in-licensing of products and other strategic transactions, such as acquisitions of companies, asset purchases and out-licensing of product candidates or technologies. Additional potential transactions that we may consider include a variety of different business arrangements, including strategic partnerships, collaborations, joint ventures, business combinations and investments. Any such transaction may require us to incur non-recurring or other charges, may increase our near and long-term expenditures and may pose significant integration challenges or disrupt our management or business, which could adversely affect our operations and

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financial results. For example, these transactions may entail numerous operational and financial risks, including:

    exposure to unknown liabilities;

    disruption of our business and diversion of our management's time and attention in order to develop acquired products, product candidates or technologies;

    incurrence of substantial debt or dilutive issuances of equity securities to pay for acquisitions;

    higher than expected acquisition and integration costs;

    write-downs of assets or goodwill or impairment charges;

    increased amortization expenses;

    difficulty and cost in combining the operations and personnel of any acquired businesses with our operations and personnel;

    impairment of relationships with key suppliers or other counterparties of any acquired businesses due to changes in management and ownership; and

    inability to retain key employees of any acquired businesses.

Our recurring operating losses and negative cash flows from operations have raised substantial doubt regarding our ability to continue as a going concern.

        Our recurring operating losses and negative cash flows from operations raise substantial doubt about our ability to continue as a going concern. As a result, our independent registered public accounting firm included an explanatory paragraph in its report on our financial statements as of and for the year ended December 31, 2014 with respect to this uncertainty. We have no current source of revenues to sustain our present activities, and we do not expect to generate revenues until, and unless, the FDA or other regulatory agencies approve our product candidates and we successfully commercialize any such product candidates. Accordingly, our ability to continue as a going concern will require us to obtain additional financing to fund our operations. The perception of our ability to continue as a going concern may make it more difficult for us to obtain financing for the continuation of our operations and could result in the loss of confidence by investors, suppliers and employees.

Risks Related to Our Business and Industry

We are heavily dependent on the success of our product candidates, CERC-301 and CERC-501. If we fail to obtain marketing approval for and commercialize CERC-301 and CERC-501, or experience delays in doing so, our business will be materially harmed.

        We intend to invest a significant portion of our efforts and financial resources in the development of our product candidates, CERC-301 and CERC-501; and we anticipate that we will allocate the majority of the proceeds of this offering toward their development. To date we have not marketed, distributed or sold any products. Our ability to generate revenues is substantially dependent on the development and commercialization of CERC-301 and CERC-501. If our clinical development for CERC-301 is successful, we plan to submit an NDA seeking approval to commercialize CERC-301 as an oral, adjunctive treatment of patients with MDD who are failing to achieve an adequate response to their current antidepressant treatment and, are severely depressed. If our clinical development for CERC-501 is successful, we plan to submit an NDA seeking approval to commercialize CERC-501 for adjunctive treatment of major depressive disorder, or MDD, and for substance use disorders (e.g., nicotine, alcohol, and/or cocaine). If we receive approval for CERC-501 for adjunctive treatment of MDD and for substance use disorders, we plan to further develop CERC-501 for the concurrent treatment of MDD and substance use disorders, or co-occurring disorders. We cannot commercialize

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our product candidates prior to obtaining marketing approval from the FDA. Each of CERC-301 and CERC-501 is susceptible to the risks of failure inherent at any stage of drug development, including the appearance of unexpected adverse events, the failure to demonstrate efficacy and the FDA's determination that such candidate is not approvable. If we do not receive marketing approval for and commercialize either CERC-301 or CERC-501, we will not be able to generate product revenues in the foreseeable future, or at all.

        If, following submission, our NDA for either product candidate is not accepted for substantive review or approved, the FDA may require that we conduct additional clinical or preclinical trials, manufacture additional validation batches or develop additional analytical test methods before it will reconsider our application for such product candidate. If the FDA requires additional studies or data, we would incur increased costs and delays in the marketing approval process, which may require us to expend more resources than we have available. In addition, the FDA may not consider any additional required trials that we perform and complete to be sufficient.

        Even if we believe that the data from our clinical trials and analytical testing methods support marketing approval of CERC-301 or CERC-501 in the United States, the FDA may not agree with our analysis and approve our NDA. Any delay in obtaining, or an inability to obtain, marketing approvals would prevent us from commercializing CERC-301 or CERC-501, generating revenues and achieving profitability.

Only two of our product candidates that we intend to commercialize are in clinical development. Preclinical testing of other product candidates may not lead to them advancing into clinical trials. If we do not successfully complete preclinical testing of our product candidates or experience significant delays in doing so, our business will be materially harmed.

        We have invested a significant portion of our efforts and financial resources in the identification and preclinical and clinical development of product candidates. For example, a significant portion of our financial resources were dedicated to the development of FP01, which we no longer plan to develop. Our ability to generate product revenues, which we do not expect will occur for many years, if ever, will depend heavily on our ability to advance our preclinical product candidates into clinical development and successfully complete preclinical testing of our clinical stage product candidates. The outcome of preclinical studies may not predict the success of clinical trials. Preclinical data are often susceptible to varying interpretations and analyses, and many companies that believed their product candidates performed satisfactorily in preclinical studies have nonetheless failed in clinical development. Our inability to successfully complete preclinical development could result in additional costs to us relating to product development and obtaining marketing approval and impair our ability to generate product revenues and commercialization and sales milestone payments and royalties on product sales.

If clinical trials of our product candidates fail to demonstrate safety and efficacy to the satisfaction of regulatory authorities or do not otherwise produce positive results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates.

        Before obtaining required approvals from regulatory authorities for the sale of future product candidates, we alone, or with a partner, must conduct extensive clinical trials to demonstrate the safety and efficacy of the product candidates in humans. Clinical testing is expensive and difficult to design and implement, can take many years to complete and is uncertain as to outcome. A failure of one or more clinical trials can occur at any stage of testing. For example, the Clin301-201 study for CERC-301 failed to meet its primary endpoint and, in addition, our discontinued product candidate FP01 failed to meet its primary endpoint in two Phase 2 clinical studies. The outcome of preclinical studies and early clinical trials may not predict the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. A number of companies in the pharmaceutical and biotechnology

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industries have suffered significant setbacks in advanced clinical trials due to lack of efficacy or unacceptable safety profiles, notwithstanding promising results in earlier trials. Our product candidates will require additional clinical and preclinical development, management of clinical, preclinical and manufacturing activities, regulatory approval in multiple jurisdictions, obtaining manufacturing supply on our own or from a third party, building of a commercial organization, and substantial investment and significant marketing efforts before we generate any revenues from product sales. We do not know whether the clinical trials we or our partners may conduct will demonstrate adequate efficacy and safety to result in regulatory approval to market any of our product candidates in any particular jurisdiction or jurisdictions. If later stage clinical trials do not produce favorable results, our ability to achieve regulatory approval for any of our product candidates would be adversely impacted.

If we experience delays in clinical testing, we will be delayed in obtaining regulatory approvals and commercializing our product candidates, our costs may increase and our business may be harmed.

        We do not know whether any clinical trials will begin as planned, whether the design will be revised prior to or during conduct of the study, completed on schedule or conducted at all. Our product development costs will increase if we experience delays in clinical testing. Significant clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do, which would impair our ability to successfully commercialize our product candidates and may harm our business, results of operations and prospects. Events which may result in a delay or unsuccessful completion of clinical development include:

    delays in reaching an agreement with or failure in obtaining authorization from the FDA, other regulatory authorities or institutional review boards, or IRBs, to commence or amend a clinical trial;

    imposition of a clinical hold or trial termination following an inspection of our clinical trial operations or trial sites by the FDA or other regulatory authorities, or due to concerns about trial design, or a decision by the FDA, other regulatory authorities, IRBs or the company, or recommendation by a data safety monitoring board, to place the trial on hold or otherwise suspend or terminate clinical trials at any time for safety issues or for any other reason;

    delays in reaching agreement on acceptable terms with prospective CROs and clinical trial sites;

    deviations from the trial protocol by clinical trial sites and investigators, or failing to conduct the trial in accordance with regulatory requirements;

    failure of our third parties, such as CROs, to satisfy their contractual duties or meet expected deadlines;

    failure to enter into agreements with third parties to obtain the results of clinical trials;

    delays in the importation and manufacture of clinical supply;

    delays in the testing, validation and delivery of the clinical supply of the product candidates to the clinical sites;

    for clinical trials in selected subject populations, delays in identification and auditing of central or other laboratories and the transfer and validation of assays or tests to be used to identify selected subjects;

    delays in recruiting suitable subjects to participate in a trial;

    delays in having subjects complete participation in a trial or return for post-treatment follow-up;

    delays caused by subjects dropping out of a trial due to side effects or disease progression;

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    delays in adding new investigators and clinical trial sites;

    withdrawal of clinical trial sites from our clinical trials as a result of changing standards of care or the ineligibility of a site to participate in our clinical trials; or

    changes in government regulations or administrative actions or lack of adequate funding to continue the clinical trials.

        Any inability by us or our partners to timely complete clinical development could result in additional costs to us relating to product development and obtaining marketing approval and impair our ability to generate product revenues and commercialization and sales milestone payments and royalties on product sales.

If we are unable to enroll appropriate subjects in clinical trials, we will be unable to complete these trials on a timely basis or at all.

        Identifying and qualifying subjects to participate in clinical trials of our product candidates is critical to our success. The timing of our clinical trials depends on the speed at which we can recruit appropriate subjects to participate in testing our product candidates as well as completion of required follow-up periods. If subjects are unwilling to participate in our trials because of negative publicity from adverse events in the biotechnology industry or for other reasons, including competitive clinical trials for similar subject populations, the timeline for recruiting subjects, conducting trials and obtaining marketing approval of potential products may be delayed. These delays could result in increased costs, delays in advancing our product development, delays in testing the effectiveness of our technology or termination of the clinical trials altogether. Many factors affect subject enrollment, including:

    the size and nature of the subject population;

    the number and location of clinical sites we enroll;

    the proximity of subjects to clinical sites;

    perceived risks and benefits of the product candidate under trial;

    competition with other companies for clinical sites or subjects;

    competing clinical trials;

    the eligibility and exclusion criteria for the trial;

    the design of the clinical trial;

    effectiveness of publicity for the clinical trials;

    inability to obtain and maintain subject consents;

    ability to monitor subjects adequately during and after the administration of the product candidate and the ability of subjects to comply with the clinical trial requirements;

    risk that enrolled subjects will drop out or be withdrawn before completion; and

    clinicians' and subjects' perceptions as to the potential advantages of the drug being studied in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating.

        There is significant competition for recruiting subjects in clinical trials for product candidates for the treatment of depression, substance use disorders and impaired executive function, and we or our partners may be unable to enroll the subjects we need to complete clinical trials on a timely basis or at all. Furthermore, we rely on CROs and clinical trial sites to ensure the proper and timely conduct of our clinical trials, and while we have agreements governing their committed activities, we have limited

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influence over their actual performance. If we are unable to enroll sufficient subjects in our clinical trials, if enrollment is slower than we anticipate, or if our clinical trials require more subjects than we anticipate, our clinical trials may be delayed or may not be completed. If we experience delays in our clinical trials, the commercial prospects of our product candidates will be harmed. In addition, any delays in completing our clinical trials will increase our costs, slow down our product candidate development and approval process and jeopardize our ability to commence product sales and generate revenues.

We may in the future conduct, clinical trials for certain of our product candidates at sites outside the United States, and the FDA may not accept data from trials conducted in such locations.

        We may in the future choose to conduct one or more of our clinical trials outside the United States. Although the FDA may accept data from clinical trials conducted outside the United States, acceptance of this data is subject to certain conditions imposed by the FDA. For example, the clinical trial must be well designed and conducted and performed by qualified investigators in accordance with ethical principles and current Good Clinical Practice, or GCPs. The trial population must also adequately represent the United States population, and the data must be applicable to the United States population and United States medical practice in ways that the FDA deems clinically meaningful. Generally, the patient population for any clinical trials conducted outside of the United States must be representative of the population for whom we intend to seek approval in the United States. In addition, while these clinical trials are subject to the applicable local laws, FDA acceptance of the data will be dependent upon its determination that the trials also complied with all applicable United States laws and regulations. There can be no assurance that the FDA will accept data from trials conducted outside of the United States. If the FDA does not accept the data from any of our clinical trials that we determine to conduct outside the United States, it would likely result in the need for additional trials, which would be costly and time-consuming and delay or permanently halt our development of the product candidate.

We may fail to successfully identify, in-license, acquire, develop or commercialize potential product candidates.

        The success of our business depends in part upon our ability to identify and validate new therapeutic targets and identify, develop and commercialize therapeutics, which we may develop ourselves, in-license or acquire from others. Research programs designed to identify product candidates require substantial technical, financial and human resources, whether or not any product candidates are ultimately identified. Our research efforts may initially show promise in identifying potential therapeutic targets or candidates, yet fail to yield product candidates for clinical development for a number of reasons, including:

    our methodology, including our screening technology, may not successfully identify medically relevant potential product candidates;

    our competitors may develop alternatives that render our product candidates obsolete;

    we may encounter product manufacturing difficulties that limit yield or produce undesirable characteristics that increase the cost of goods, cause delays or make the product candidates unmarketable;

    our product candidates may cause adverse effects in subjects, even after successful initial toxicology studies, which may make the product candidates unmarketable;

    our product candidates may not be capable of being produced in commercial quantities at an acceptable cost, or at all;

    our product candidates may not demonstrate a meaningful benefit to subjects;

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    our potential collaboration partners may change their development profiles or plans for potential product candidates or abandon a therapeutic area or the development of a partnered product; and

    our reliance on third party clinical trials may cause us to be denied access to clinical results that may be significant to further clinical development.

        Additionally, we may focus our efforts and resources on potential programs or product candidates that ultimately prove to be unsuccessful. If any of these events occur, we may be forced to abandon our development efforts for a program or programs, which would have a material adverse effect on our business, operating results and prospects and could potentially cause us to cease operations.

We may not be successful in our efforts to leverage and expand our COMTi platform to build a pipeline of product candidates.

        A key element of our strategy is to leverage and expand our COMTi platform to build a pipeline of product candidates for conditions with impairment of executive function, and to progress these product candidates through clinical development for the treatment of a variety of different types of diseases states involving impaired executive functioning. To date, we have selected a preclinical lead candidate for our COMTi platform, CERC-406, but CERC-406 or any other product candidates developed from our COMTi platform may not be safe or effective. Further, our continued development of the COMTi platform will be dependent upon receiving positive preclinical and clinical data that, in our judgment, merits advancing such program. Even if we are successful in continuing to build and expand our pipeline, the potential product candidates that we identify may not be suitable for clinical development, including as a result of being shown to have harmful side effects or other characteristics that indicate that they are unlikely to be products that will receive marketing approval and achieve market acceptance. If we do not successfully develop and commercialize product candidates based upon our technological approach, we will not be able to obtain product revenues in future periods, which likely would result in significant harm to our financial position and adversely affect our stock price.

The marketing approval processes of the FDA and comparable foreign regulatory authorities are lengthy, time-consuming, costly and inherently unpredictable. Our inability to obtain regulatory approval for our product candidates would substantially harm our business.

        The time required to obtain approval to market new drugs by the FDA and comparable foreign regulatory authorities is unpredictable but typically takes many years following the commencement of preclinical studies and clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities. In addition, approval policies, regulations or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate's clinical development and may vary among jurisdictions. We have not obtained regulatory approval for any product candidate and it is possible that none of our existing product candidates or any future product candidates will ever obtain regulatory approval. Moreover, the filing of an NDA requires a payment of a significant NDA user fee upon submission. The filing of an NDA for our product candidates may be delayed due to our lack of financial resources to pay such user fee.

        Our product candidates could fail to receive regulatory approval from the FDA or a comparable foreign regulatory authority for many reasons, including:

    the FDA or comparable foreign regulatory authorities may disagree on the design or implementation of our clinical trials, including the methodology used in our studies, our chosen endpoints, our statistical analysis, or our proposed product indication. For instance, the FDA may find that the designs that we are utilizing in our completed and planned Phase 2 clinical trials of CERC-301 and CERC-501 do not support an adequate and well-controlled study. The FDA also may not agree with the various depression and other disease scales and evaluation

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      tools that we are using in our clinical trials to assess the efficacy of our product candidates. Further, the FDA may not agree with our endpoints and/or indications selected for our studies for CERC-301 and CERC-501;

    the FDA or comparable foreign regulatory authorities may disagree with our development plans for our product candidates. For instance, at this time we have not yet discussed our development plans for either CERC-501 or CERC-406 with the FDA. While we plan to discuss the development of these product candidates with the FDA, the FDA may not agree with our current development approach;

    our failure to demonstrate to the satisfaction of the FDA or comparable regulatory authorities that a product candidate is safe and effective for its proposed indication;

    our clinical trials may fail to meet the level of statistical significance required for approval. For example, in a proof of concept study of CERC-301 conducted by the National Institute of Mental Health, CERC-301 failed to provide a significant improvement in subjects receiving the compound as compared to those receiving a placebo, as measured by the Montgomery-Asberg Depression Rating Scale, the primary assessment tool. Significant improvements were, however, observed using alternative assessment tools, such as the Hamilton Depression Inventory 17 item scale or the Beck Depression Inventory. Further, our Clin301-201 Phase 2 study for CERC-301 failed to meet its primary endpoint;

    we may fail to demonstrate that a product candidate's clinical and other benefits outweigh its safety risks;

    the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials;

    data collected from clinical trials of our product candidates may be insufficient to support the submission and filing of an NDA, other submission or to obtain marketing approval. For example, the FDA may require additional studies to show that our product candidates are safe or effective;

    we may fail to obtain approval of the manufacturing processes or facilities of third-party manufacturers with whom we contract for clinical and commercial supplies; or

    there may be changes in the approval policies or regulations that render our preclinical and clinical data insufficient for approval.

        The FDA or comparable foreign regulatory authority may require more information, including additional preclinical or clinical data to support approval, which may delay or prevent approval and our commercialization plans, or we may decide to abandon the development program. This lengthy approval process, as well as the unpredictability of future clinical trial results, may result in our failing to obtain approval to market our product candidates, which would significantly harm our business, results of operations and prospects. In addition, even if we were to obtain approval, regulatory authorities may approve any of our product candidates for fewer or more limited indications than we request, including more limited patient populations, may require that contraindications, warnings or precautions be included in the product labeling, including a black-boxed warning, may grant approval contingent on the performance of costly post-marketing clinical trials or other post-market requirements, or may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate. Any of the foregoing scenarios could materially harm the commercial prospects for our product candidates.

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A fast track product, breakthrough therapy or priority review designation by the FDA for our product candidates may not lead to faster development or regulatory review or approval process, and it does not increase the likelihood that our product candidates will receive marketing approval.

        We have received a fast track product designation for CERC-301 for the treatment of MDD and we may seek a breakthrough therapy designation and priority review designation. For CERC-501, or for certain of our other product candidates, if supported by the results of clinical trials, we may seek fast track product designation, breakthrough therapy designation and priority review designation. A fast track product designation is designed to facilitate the clinical development and expedite the review of drugs intended to treat a serious or life-threatening condition which demonstrate the potential to address an unmet medical need. A breakthrough therapy is defined as a drug that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. Priority review designation is intended to speed the FDA marketing application review timeframe for drugs that treat a serious condition and, if approved, would provide a significant improvement in safety or effectiveness. For drugs and biologics that have been designated as fast track products or breakthrough therapies, interaction and communication between the FDA and the sponsor of the trial can help to identify the most efficient path for clinical development. Sponsors of drugs designated as fast track products or breakthrough therapies may also be able to submit marketing applications on a rolling basis, meaning that the FDA may review portions of a marketing application before the sponsor submits the complete application to the FDA, as long as the sponsor pays the user fee upon submission of the first portion of the marketing application. For products that receive a priority review designation, the FDA's marketing application review goal is shortened to six months, as opposed to ten months under standard review. This review goal is based on the date the FDA accepts the marketing application for review, which typically adds approximately two months to the timeline for review and decision from the date of submission.

        Designation as a fast track product, breakthrough therapy or priority review product is within the discretion of the FDA. Accordingly, even if we believe one of our product candidates meets the criteria for designation as a fast track product, breakthrough therapy or priority review product, the FDA may disagree and instead determine not to make such designation. In any event, the receipt of such a designation for a product candidate may not result in a faster development process, review or approval compared to drugs considered for approval under conventional FDA procedures and does not assure ultimate marketing approval by the FDA. In addition, with regard to fast track products and breakthrough therapies, the FDA may later decide that the products no longer meet the conditions for qualification as either a fast track product or a breakthrough therapy or, for priority review products, decide that the time period for FDA review or approval will not be shortened.

As appropriate, we intend to seek all available periods of regulatory exclusivity for our product candidates. However, there is no guarantee that we will be granted these periods of regulatory exclusivity or that we will be able to maintain these periods of exclusivity.

        The FDA grants product sponsors certain periods of regulatory exclusivity, during which the agency may not approve, and in certain instances, may not accept, certain marketing applications for competing drugs. For example, product sponsors may be eligible for five years of exclusivity from the date of approval of a new chemical entity, seven years of exclusivity for drugs that are designated to be orphan drugs, and/or a six-month period of exclusivity added to any existing exclusivity period or patent life for the submission of FDA requested pediatric data. While we intend to apply for all periods of market exclusivity that we may be eligible for, there is no guarantee that we will receive all such periods of market exclusivity. Additionally, under certain circumstances, the FDA may revoke the period of market exclusivity. Thus, there is no guarantee that we will be able to maintain a period of

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market exclusivity, even if granted. Moreover, we have not sought to obtain orphan drug designation for any of our product candidates, which the FDA must first grant to be eligible for orphan drug exclusivity, but may if we determine that we may be eligible. In the case of orphan designation, other benefits, such as tax credits and exemption from user fees may be available. If we are not able to obtain or maintain orphan drug designation or any period of market exclusivity to which we may be entitled, we will be materially harmed, as we will potentially be subject to greater market competition and may lose the benefits associated with programs.

Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their marketing approval, limit the commercial profile of an approved label, or result in significant negative consequences following any marketing approval.

        Undesirable side effects caused by our product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of marketing approval by the FDA or other comparable foreign regulatory authority. Results of our trials could reveal a high and unacceptable severity and prevalence of side effects or unexpected characteristics. For example, our Phase 2 clinical trials for CERC-301 could reveal adverse events, including, but not limited to, dose-related increases in blood pressure, palpitations, sleepiness, forgetfulness, headache, dizziness, fatigue, lightheadedness or impaired concentration. In our completed Phase 2 clinical study, Clin301-201, in general, CERC-301 was well tolerated with rates of adverse events similar to that of placebo. The most common treatment emergent adverse events were nervous system disorders, occurring in 25.9% and 26.9%, respectively, of subjects in the two active treatment sequences compared to 22.4% of subjects who received placebo during the entire study. Of the nervous system treatment emergent adverse events, dizziness was most common, occurring in 18.5% and 7.7%, respectively, of subjects in the two active treatment sequences compared to 2.0% of subjects who received placebo during the entire study. Four serious adverse events in three subjects were reported during the conduct of the study, two in a subject randomized to placebo (suicide attempt; alcoholism) and two in subjects that received CERC-301 (worsening depression with psychotic features and unstable angina). Overall, the adverse events observed in this study were generally consistent with the prior clinical trials conducted for CERC-301. In our planned clinical study of CERC-301, CLIN301-203, we will be increasing the CERC-301 dose administered to subjects. This dose increase could increase the risk of serious adverse events. Also, based on the previous studies conducted for CERC-501, Phase 2 studies of CERC-501 could reveal adverse events, including, but not limited to, dizziness, nausea, diarrhea, headache, anxiety, tachycardia and dyspepsia.

        Should our clinical studies of our product candidates reveal undesirable side effects, we could suspend or terminate our trials or the FDA or comparable foreign regulatory authorities as well as IRBs could order us to suspend or cease clinical trials. The FDA or comparable regulatory authorities could also deny approval of our product candidates for any or all targeted indications or only for a limited indication or patient population or could require label warnings, contraindications or precautions, including black box warnings, post-market studies, testing and surveillance programs or other conditions including distribution restrictions or other risk management mechanisms under a risk evaluation and mitigation strategy, or REMS. Drug-related side effects could affect subject recruitment or the ability of enrolled subjects to complete the trial or result in potential product liability claims. Any of these occurrences may harm our business, financial condition and prospects significantly.

        Additionally, if one or more of our product candidates receives marketing approval, and we or others later identify undesirable side effects caused by such products, a number of potentially significant negative consequences could result, including:

    we may suspend marketing of, or withdraw or recall, such product;

    regulatory authorities may withdraw approvals of such product;

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    regulatory authorities may require additional warnings on the label or other label modifications;

    the FDA or other regulatory bodies may issue safety alerts, Dear Healthcare Provider letters, press releases or other communications containing warnings about such product;

    the FDA may require the establishment or modification of a REMS or other restrictions on marketing and distribution, or a comparable foreign regulatory authority may require the establishment or modification of a similar strategy that may, for instance, require us to issue a medication guide outlining the risks of such side effects for distribution to patients or restrict distribution of our products and impose burdensome implementation requirements on us;

    regulatory authorities may require that we conduct post-marketing studies;

    we could be sued and held liable for harm caused to subjects or patients; and

    our reputation may suffer.

        Any of these events could prevent us from achieving or maintaining market acceptance of the particular product candidate or otherwise materially harm the commercial prospects for the product candidate, if approved, and could significantly harm our business, financial condition, results of operations and prospects.

Changes in product candidate manufacturing or formulation may result in additional costs or delay.

        As product candidates are developed through preclinical studies to late-stage clinical trials towards regulatory approval and commercialization, it is common that various aspects of the development program, such as manufacturing methods and formulation, are altered in an effort to optimize processes and results. Such changes carry the risk that they will not achieve these intended objectives. Any of these changes could cause our product candidates to perform differently and affect the results of planned clinical trials or other future clinical trials conducted with the altered materials. Such changes may also require additional testing, FDA notification or FDA approval.

        Similarly, changes in the location of manufacturing or addition of manufacturing facilities may increase our costs, and require additional studies and FDA approval. This may require us to ensure that the new facility meets all applicable regulatory requirements, is adequately validated and qualified, and to conduct additional studies of product candidates manufactured at the new location. Any of the above could delay completion of clinical trials, require the conduct of bridging clinical trials or the repetition of one or more clinical trials, increase clinical trial costs, delay regulatory approval of our product candidates and jeopardize our ability to commence product sales and generate revenue.

Even if we complete the necessary clinical trials, we cannot predict when or if we will obtain marketing approval to commercialize a product candidate or the approval may be for a more narrow indication than we expect.

        We cannot commercialize a product candidate until the appropriate regulatory authorities have reviewed and approved the product candidate. Even if our product candidates demonstrate safety and efficacy in clinical trials, the regulatory agencies may not complete their review processes in a timely manner, or we may not be able to obtain marketing approval from the relevant regulatory agencies. Additional delays may result if the FDA, an FDA Advisory Committee or other regulatory authority recommends non-approval or restrictions on approval. In addition, we may experience delays or rejections based upon additional government regulation from future legislation or administrative action, or changes in regulatory agency policy during the period of product development, clinical trials and the review process. Regulatory authorities also may approve a product candidate for fewer or more limited indications than requested, may impose significant limitations in the form of narrow indications, warnings, including black-box warnings, precautions or contra-indications with respect to conditions of

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use or may grant approval subject to the performance of costly post-marketing clinical trials or other post-marketing requirements, including a REMS. In addition, regulatory agencies may not approve the labeling claims that are necessary or desirable for the successful commercialization of our product candidates. For instance, in 2007, the FDA requested that makers of all antidepressant medications update an existing black-box warning about an increased risk of suicidal thought and behavior. Our drugs, if approved, may be required to carry warnings comparable to this and other class-wide warnings. Any of the foregoing scenarios could materially harm the commercial prospects for our product candidates.

Even if our product candidates receive marketing approval, we will still be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense. Additionally, our product candidates, if approved, could be subject to labeling and other restrictions and market withdrawal and we may be subject to administrative sanctions or penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our products.

        Even if we obtain marketing approval for a product candidate, we would be subject to ongoing requirements by the FDA and comparable foreign regulatory authorities governing the manufacture, quality control, further development, labeling, packaging, storage, distribution, safety surveillance, import, export, advertising, promotion, recordkeeping and reporting of safety and other post-market information. The FDA and comparable foreign regulatory authorities will continue to closely monitor the safety profile of any product even after approval. If the FDA or comparable foreign regulatory authorities become aware of new safety information after approval of any of our product candidates, they may withdraw approval, require labeling changes or establishment of a REMS or similar strategy, impose significant restrictions on a product's indicated uses or marketing, or impose ongoing requirements for potentially costly post-approval studies or post-market surveillance. In addition, any marketing approvals that we obtain for our product candidates may be subject to limitations on the approved indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing and other requirements, including Phase 4 clinical trials, imposition of a REMS and surveillance to monitor the safety and efficacy of the product candidate. For example, during a meeting with the FDA regarding CERC-301, the FDA noted that it does not currently accept the explicit labeling claim of a rapid-acting antidepressant, or RAAD, and indicated that we may therefore be subject to limitations on our ability to label and promote the product as a RAAD upon approval.

        In addition, manufacturers of drug products and their facilities, including contracted facilities, are subject to continual review and periodic inspections by the FDA and other regulatory authorities for compliance with current Good Manufacturing Practice, or GMP, regulations and standards. If we or a regulatory agency discover previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, we may be subject to reporting obligations and a regulatory agency may impose restrictions on that product, the manufacturing facility or us, or our suppliers, including requesting recalls or withdrawal of the product from the market or suspension of manufacturing. If we, our product candidates, our contractors, the manufacturing facilities for our product candidates or others working on our behalf fail to comply with applicable regulatory requirements, either before or after marketing approval, a regulatory agency may:

    issue Warning Letters or Untitled Letters;

    mandate modifications to promotional materials or labeling, or require us to provide corrective information to healthcare practitioners;

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    require us to enter into a consent decree, which can include imposition of various fines, reimbursements for inspection costs, required due dates for specific actions and penalties for noncompliance;

    seek an injunction or impose civil or criminal penalties or monetary fines, restitution or disgorgement, as well as imprisonment;

    suspend or withdraw marketing approval;

    suspend or terminate any ongoing clinical studies;

    refuse to approve pending applications or supplements to applications filed by us;

    debar us from submitting marketing applications, exclude us from participation in federal healthcare programs, require a corporate integrity agreement or deferred prosecution agreements, debar us from government contracts and refuse future orders under existing contracts;

    suspend or impose restrictions on operations, including restrictions on marketing, distribution or manufacturing of the product, or the imposition of costly new manufacturing requirements or use of alternative suppliers; or

    seize or detain products, refuse to permit the import or export of products, or request that we initiate a product recall.

        The occurrence of any event or penalty described above may inhibit our ability to commercialize our products and generate revenue.

        Advertising and promotion of any product candidate that obtains approval in the United States will be heavily scrutinized by the FDA, the Department of Justice, the Department of Health and Human Services' Office of Inspector General, state attorneys general, members of Congress and the public. While the FDA does not restrict physicians from prescribing approved drugs for uses outside of the drugs' approved labeling, known as off-label use, pharmaceutical manufacturers are prohibited from promoting and marketing their products for such uses. Violations, including promotion of our products for off-label uses, are subject to enforcement letters, inquiries, investigations, civil and criminal sanctions by the government, corporate integrity agreements, deferred prosecution agreements, debarment from government contracts and refusal of future orders under existing contracts, and exclusion from participation in federal healthcare programs. Additionally, comparable foreign regulatory authorities will heavily scrutinize advertising and promotion of any product candidate that obtains approval outside of the United States.

        In the United States, engaging in the impermissible promotion of our products for off-label uses can also subject us to false claims litigation under federal and state statutes, which can lead to civil and criminal penalties and fines, debarment from government contracts and refusal of future orders under existing contracts, deferred prosecution agreements, and corporate integrity agreements with governmental authorities that materially restrict the manner in which a company promotes or distributes drug products. These false claims statutes include the federal civil False Claims Act, which allows any individual to bring a lawsuit against a pharmaceutical company on behalf of the federal government alleging submission of false or fraudulent claims, or causing to present such false or fraudulent claims, for payment by a federal program such as Medicare or Medicaid. If the government decides to intervene and prevails in the lawsuit, the individual will share in any fines or settlement funds. If the government does not intervene, the individual may proceed on his or her own. Since 2004, these False Claims Act lawsuits against pharmaceutical companies have increased significantly in volume and breadth, leading to several substantial civil and criminal settlements, such as settlements regarding certain sales practices promoting off-label drug uses involving fines that are as much as $3.0 billion. This growth in litigation has increased the risk that a pharmaceutical company will have to

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defend a false claim action, pay settlement fines or restitution, agree to comply with burdensome reporting and compliance obligations, and be excluded from Medicare, Medicaid and other federal and state healthcare programs. If we do not lawfully promote our approved products, we may become subject to such litigation and, if we do not successfully defend against such actions, those actions may have a material adverse effect on our business, financial condition, results of operations and prospects.

        The FDA's policies may change and additional government regulations may be enacted that could prevent, limit or delay marketing approval, and the sale and promotion of our product candidates. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained, which would adversely affect our business, prospects and ability to achieve or sustain profitability.

If we are unable to, or are delayed in obtaining, state regulatory licenses for the distribution of our products, we would not be able to sell our product candidates in such states.

        The majority of states require manufacturer and/or wholesaler licenses for the sale and distribution of drugs into that state. The application process is complicated, time consuming and requires dedicated personnel or a third party to oversee and manage. If we are delayed in obtaining these state licenses, or denied the licenses, even with FDA approval, we would not be able to sell or ship product into that state which would adversely affect our sales and revenues.

If any of our product candidates are ultimately regulated as controlled substances, we, our contract manufacturers, as well as distributors, prescribers, and dispensers will be required to comply with additional regulatory requirements which could delay the marketing of our product candidates, and increase the cost and burden of manufacturing, distributing, dispensing, and prescribing our product candidates.

        Before we can commercialize our product candidates, the United States Drug Enforcement Administration, or DEA, may need to determine the controlled substance Schedule, taking into account the recommendation of the FDA. This may be a lengthy process that could delay our marketing of a product candidate and could potentially diminish any regulatory exclusivity periods for which we may be eligible. While we currently do not know whether any of our product candidates will be considered to be controlled substances, certain of our product candidates may be regulated as controlled substances.

        If any of our product candidates are regulated as controlled substances, depending on the controlled substance schedule in which the product candidates are placed, we, our contract manufacturers, and any distributers, prescribers, and dispensers of the scheduled product candidates may be subject to significant regulatory requirements, such as registration, security, recordkeeping, reporting, storage, distribution, importation, exportation, inventory, quota and other requirements administered by the DEA. Moreover, if any of our product candidates are regulated as controlled substances, we and our contract manufacturers would be subject to initial and periodic DEA inspection. If we or our contract manufacturers are not able to obtain or maintain any necessary DEA registrations, we may not be able to commercialize any product candidates that are deemed to be controlled substances or we may need to find alternative contract manufacturers, which would take time and cause us to incur additional costs, delaying or limit our commercialization efforts.

        Because of their restrictive nature, these laws and regulations could limit commercialization of our product candidates, should they be deemed to contain controlled substances. Failure to comply with the applicable controlled substance laws and regulations can also result in administrative, civil or criminal enforcement. The DEA may seek civil penalties, refuse to renew necessary registrations, or initiate administrative proceedings to revoke those registrations. In some circumstances, violations could result

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in criminal proceedings or consent decrees. Individual states also independently regulate controlled substances.

Our failure to obtain regulatory approval in international jurisdictions would prevent us from marketing our product candidates outside the United States, which would limit our market opportunities and adversely affect our business.

        In order to market and sell our products in other jurisdictions, we must obtain separate marketing approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involve additional testing. The time required to obtain approval may differ substantially from that required to obtain FDA approval. The regulatory approval process outside the United States generally includes all of the risks associated with obtaining FDA approval. In addition, in many countries outside the United States, we must secure product reimbursement approvals before regulatory authorities will approve the product for sale in that country. Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us and could delay or prevent the introduction of our products in certain countries. Further, clinical trials conducted in one country may not be accepted by regulatory authorities in other countries. If we fail to comply with the regulatory requirements in international markets and receive applicable marketing approvals, our target market will be reduced and our ability to realize the full market potential of our product candidates will be harmed and our business will be adversely affected. We may not obtain foreign regulatory approvals on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions. Approval by one regulatory authority outside the United States does not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA. Also, regulatory approval for any of our product candidates may be withdrawn. However, the failure to obtain approval in one jurisdiction may negatively impact our ability to obtain approval in another jurisdiction. Our failure to obtain approval of any of our product candidates by regulatory authorities in another country may significantly diminish the commercial prospects of that product candidate and our business prospects could decline.

If we obtain approval to commercialize our product candidates outside of the United States, a variety of risks associated with international operations could materially adversely affect our business.

        If any of our product candidates are approved for commercialization, we may enter into agreements with third parties to market them on a worldwide basis or in more limited geographical regions. We expect that we will be subject to additional risks related to entering into international business relationships, including:

    different regulatory requirements for approval of drugs in foreign countries;

    the potential for so-called parallel importing, which is what happens when a local seller, faced with high or higher local prices, opts to import goods from a foreign market (with low or lower prices) rather than buying them locally;

    challenges enforcing our contractual and intellectual property rights, especially in those foreign countries that do not respect and protect intellectual property rights to the same extent as the United States;

    unexpected changes in tariffs, trade barriers and regulatory requirements;

    economic weakness, including inflation, or political instability in particular foreign economies and markets;

    compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;

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    foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to doing business in another country;

    difficulties staffing and managing foreign operations;

    workforce uncertainty in countries where labor unrest is more common than in the United States;

    potential liability under the Foreign Corrupt Practices Act of 1977 or comparable foreign regulations;

    production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and

    business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters including earthquakes, typhoons, floods and fires.

        These and other risks associated with our international operations may materially adversely affect our ability to attain or maintain profitable operations.

We face substantial competition and rapid technological change and the possibility that others may discover, develop or commercialize products before or more successfully than us.

        The biotechnology and pharmaceutical industries are intensely competitive and subject to rapid and significant technological change. We face competition with respect to our current product candidates and will face competition with respect to any future product candidates from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide. Many of our competitors have significantly greater financial, technical and human resources. Smaller and early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.

        Our competitors may obtain marketing approval of their products more rapidly than we may or may obtain patent protection or other intellectual property rights that limit our ability to develop or commercialize our product candidates. Our competitors may also develop drugs that are more effective, more convenient, more widely used and less costly or have a better safety profile than our products and these competitors may also be more successful than us in manufacturing and marketing their products.

        Our competitors will also compete with us in recruiting and retaining qualified scientific, management and commercial personnel, establishing clinical trial sites and subject registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.

        There are numerous currently approved therapies for treating depression and, consequently, competition in the depression market is intense. Many of these approved drugs are well established therapies or products and are widely accepted by physicians, patients and third party payors. Some of these drugs are branded and subject to patent protection and non patent regulatory exclusivity, and others are available on a generic basis. For example, CERC 301 will compete with drugs used as adjunctive therapies for the treatment of MDD such as Abilify, marketed by Otsuka America Pharmaceutical, Inc.; Seroquel XR, marketed by AstraZeneca Pharmaceuticals LP, or AstraZeneca; and buproprion, a generic drug. In addition, to our knowledge, there are five competitive rapid onset antidepressant or anti-suicide programs in development: esketamine, which is in Phase 3 development by Johnson & Johnson, or J&J, and is being developed to be administered as a nasal spray; AZD8108, which is in Phase 1 development by AstraZeneca and is being developed to be administered orally; Rapastinel, which is in Phase 3 development by Naurex Inc., or Naurex, which recently entered into an agreement to be acquired by Allergan plc., and is being developed to be administered intravenously; NRX 1074 by Naurex has completed a single intravenously administered dose Phase 2 study, which, along with oral and intravenous Phase 1 pharmacokinetic, or PK, findings, will be used to select an oral

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dose for a repeat-dose Phase 2 study; and ALKS-5461, which is in Phase 3 development by Alkermes plc, or Alkermes, and is being developed to be administered orally as an adjunctive therapy and has shown signals of rapid onset as an adjunctive therapy. With respect to CERC-501, to our knowledge, there are no approved pharamacologic treatments for co-occurring disorders, however, there are two competitive programs in development: ALKS 5461, which is believed to be acting as a functional KOR antagonist that is now in Phase 3 development for MDD as an adjunctive in patients who have no more than two inadequate responses to antidepressant therapy and LY2940094, which is in Phase 2 development by Eli Lilly and Company, or Lilly, and is being developed for the treatment of both MDD and alcohol dependence.

        Insurers and other third-party payors may also encourage the use of generic products or specific branded products. We expect that if CERC-301 is approved, it may be priced at a significant premium over competitive generic, including branded generic, products. In addition, any new product that competes with an approved product must demonstrate compelling advantages in efficacy, convenience, tolerability and safety in order to overcome price competition and to be commercially successful. This may make it difficult for us to differentiate our product from currently approved therapies, which may adversely impact our business strategy. If we are not able to compete effectively against our current and future competitors, our business will not grow and our financial condition and operations will suffer. Moreover, many other companies are developing new therapeutics, and we cannot predict what the standard of care will be as our product candidates progress through clinical development.

        We believe that our ability to successfully compete will depend on, among other things:

    the efficacy and safety profile of our product candidates, including relative to marketed products and product candidates in development by third parties;

    the claims we may make for our product candidates based on the approved label or any restrictions placed upon our marketing and distribution of our product candidates;

    the time it takes for our product candidates to complete clinical development and receive marketing approval;

    how quickly and effectively we alone, or with a partner, can market and launch any of our product candidates that receive marketing approval;

    the ability to commercialize any of our product candidates that receive marketing approval;

    the price of our products, including in comparison to branded or generic competitors;

    the ability to collaborate with others in the development and commercialization of new products;

    whether coverage and adequate levels of reimbursement are available under private and governmental health insurance plans, including Medicare;

    the ability to establish, maintain and protect intellectual property rights related to our product candidates;

    the entry of generic versions of our products onto the market;

    the number of products in the same therapeutic class as our product candidates;

    the ability to secure favorable managed care formulary positions, including federal healthcare program formularies;

    the ability to manufacture commercial quantities of any of our product candidates that receive marketing approval; and

    acceptance of any of our product candidates that receive marketing approval by physicians and other healthcare providers.

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Our product candidates may not achieve adequate market acceptance among physicians, patients, third-party payors and others in the medical community necessary for commercial success.

        Even if our product candidates receive marketing approval, they may not gain adequate market acceptance among physicians, patients and others in the medical community. Our commercial success also depends on coverage and adequate reimbursement of our product candidates by third-party payors, including government payors, generally, which may be difficult or time-consuming to obtain, may be limited in scope or may not be obtained in all jurisdictions in which we may seek to market our products. The degree of market acceptance of any of our approved product candidates will depend on a number of factors, including:

    the efficacy and safety profile as demonstrated in clinical trials;

    the claims we may make for our product candidates based on the approved label or any restrictions placed upon our marketing and distribution of our product candidates;

    the timing of market introduction of the product candidate as well as competitive products;

    the clinical indications for which the product candidate is approved;

    acceptance of the product candidate as a safe and effective treatment by physicians, providers and patients;

    the potential and perceived advantages of product candidates over alternative treatments, including any similar generic treatments;

    the cost of treatment in relation to alternative treatments;

    the availability of coverage and adequate reimbursement by third parties and government authorities;

    relative convenience and ease of administration;

    the frequency and severity of adverse events;

    the effectiveness of sales and marketing efforts; and

    unfavorable publicity relating to the product candidate.

        If any product candidate is approved but does not achieve an adequate level of acceptance by physicians, hospitals, third-party payors and patients, we may not generate or derive sufficient revenue from that product candidate and may not become or remain profitable.

Even if we commercialize any of our product candidates, these products may become subject to unfavorable third-party coverage and reimbursement policies, healthcare reform initiatives, or pricing regulations, any of which could negatively impact our business.

        Our ability to commercialize any products successfully will depend in part on the extent to which coverage and adequate reimbursement for these products will be available from government authorities (such as Medicare and Medicaid), private health insurers, health maintenance organizations and other entities. These third-party payors determine which medications they will cover and establish reimbursement levels, and increasingly attempt to control costs by limiting coverage and the amount of reimbursement for particular medications. Several third-party payors are requiring that drug companies provide them with predetermined discounts from list prices, are using preferred drug lists to leverage greater discounts in competitive classes and are challenging the prices charged for drugs. In addition, federal programs impose penalties on drug manufacturers in the form of mandatory additional rebates and/or discounts if commercial prices increase at a rate greater than the Consumer Price Index-Urban, and these rebates and/or discounts, which can be substantial, may impact our ability to raise

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commercial prices. We cannot be sure that coverage and reimbursement will be available for any product that we commercialize and, if coverage is available, what the level of reimbursement will be. Coverage and reimbursement may impact the demand for, or the price of, any product candidate for which we obtain marketing approval. If coverage and reimbursement are not available or available only to limited levels, we may not successfully commercialize any product candidate for which we obtain marketing approval.

        There may be significant delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may be more limited than the purposes for which the drug is approved by the FDA or comparable foreign regulatory authorities. Moreover, eligibility for coverage and reimbursement does not imply that a drug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. Interim reimbursement levels for new drugs, if applicable, may also not be sufficient to cover our costs and may only be temporary. Reimbursement rates for a drug may vary according to the clinical setting in which it is used, and may be based on reimbursement levels already set for lower cost drugs and may be incorporated into existing payments for other services. Prices paid for a drug also vary depending on the class of trade. Prices charged to government customers are subject to price controls and private institutions obtain discounts through group purchasing organizations. Net prices for drugs may be further reduced by mandatory discounts or rebates required by government healthcare programs and demanded by private payors, and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States. Our inability to promptly obtain coverage and profitable reimbursement rates from both government-funded and private payors for any approved products that we develop could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products and our overall financial condition.

        Moreover, the regulations that govern marketing approvals, pricing, coverage and reimbursement for new drug products vary widely from country to country. Current and future legislation may significantly change the approval requirements in ways that could involve additional costs and cause delays in obtaining approvals. Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we might obtain marketing approval for a product in a particular country, but then be subject to price regulations that delay our commercial launch of the product, possibly for lengthy time periods, which could negatively impact the revenues we generate from the sale of the product in that particular country. Adverse pricing limitations may hinder our ability to recoup our investment in one or more product candidates even if our product candidates obtain marketing approval.

Our failure to successfully in-license, acquire, develop and market additional product candidates or approved products would impair our ability to grow our business.

        We intend to in-license, acquire, develop and/or market additional neuropsychiatric products and product candidates, as well as other products and product candidates that address nervous system disorders. Because our internal research and development capabilities are limited, we may be dependent upon pharmaceutical and biotechnology companies, academic scientists and other researchers to sell or license products or technology to us. The success of this strategy depends partly upon our ability to identify and select promising pharmaceutical product candidates and products, negotiate licensing or acquisition agreements with their current owners and finance these arrangements.

        The process of proposing, negotiating and implementing a license or acquisition of a product candidate or approved product is lengthy and complex. Other companies, including some with substantially greater financial, marketing, sales and other resources, may compete with us for the license or acquisition of product candidates and approved products. In addition, companies that

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perceive us to be a competitor may be unwilling to assign or license rights to us. We have limited resources to identify and execute the acquisition or in-licensing of third-party products, businesses and technologies and integrate them into our current infrastructure. Moreover, we may devote resources to potential acquisitions or licensing opportunities that are never completed, or we may fail to realize the anticipated benefits of such efforts. We may not be able to acquire the rights to additional product candidates on terms that we find acceptable, or at all.

        Further, any product candidate that we acquire may require additional development efforts prior to commercial sale, including preclinical or clinical testing and approval by the FDA and applicable foreign regulatory authorities. All product candidates are prone to risks of failure typical of pharmaceutical product development, including the possibility that a product candidate will not be shown to be sufficiently safe and effective for approval by regulatory authorities. In addition, we cannot provide assurance that any approved products that we acquire will be manufactured or sold profitably or achieve market acceptance.

We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.

        Because we have limited financial and managerial resources, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.

Recently enacted and future legislation may increase the difficulty and cost for us to commercialize our product candidates and affect the prices we may obtain.

        The United States and many foreign jurisdictions have enacted or proposed legislative and regulatory changes affecting the healthcare system and pharmaceutical industry that could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability to profitably sell any product candidate for which we obtain marketing approval.

        In the United States, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or Medicare Modernization Act, changed the way Medicare covers and pays for pharmaceutical products. The legislation expanded Medicare coverage for outpatient prescription drug purchases through pharmacies, by the elderly by establishing Medicare Part D and introduced a new reimbursement methodology based on average sales prices for physician-administered drugs under Medicare Part B. In addition, this legislation provided authority for limiting the number of drugs that Medicare will cover in any therapeutic class under the new Medicare Part D program. Cost reduction initiatives and other provisions of this legislation could decrease the coverage and reimbursement rate that we receive for any of our approved products. While the Medicare Modernization Act applies only to drug benefits for Medicare beneficiaries, the Medicare and Medicaid programs increasingly are used as models for how private payors and other governmental payors develop their coverage and reimbursement policies for drugs and other medical products and services, particularly for new and innovative products and therapies, which has resulted in lower average selling prices. Therefore, any reduction in reimbursement that results from healthcare reform impacting government programs may result in a similar reduction in payments from private payors.

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        In March 2010, President Obama signed into law the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or, collectively, the Affordable Care Act, a law intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against healthcare fraud and abuse, add new transparency requirements for healthcare and health insurance industries, impose new taxes and fees on pharmaceutical and medical device manufacturers and impose additional health policy reforms. Among other things, the Affordable Care Act:

    expanded manufacturers' rebate liability under the Medicaid Drug Rebate Program by increasing the minimum rebate for both branded and generic drugs, effective the first quarter of 2010;

    revised the definition of "average manufacturer price," or AMP, for reporting purposes, which can increase the amount of Medicaid drug rebates manufacturers are required to pay to states, and created a separate AMP for certain categories of drugs provided in non-retail outpatient settings;

    extended Medicaid drug rebates, previously due only on fee-for-service utilization, to Medicaid managed care utilization;

    created an alternative rebate formula for certain new formulations of certain existing products that is intended to increase the amount of rebates due on those drugs;

    expanded the types of entities eligible to receive discounted 340B pricing, although, with the exception of children's hospitals, these newly eligible entities will not be eligible to receive discounted 340B pricing on orphan drugs. In addition, because 340B pricing is determined based on AMP and Medicaid drug rebate data, the revisions to the Medicaid rebate formula and AMP definition described above can cause the required 340B discounts to increase;

    imposed a significant annual fee on companies that manufacture or import branded prescription drug products;

    required manufacturers to provide a 50% discount off the negotiated price of prescriptions filled by beneficiaries in the Medicare Part D coverage gap, referred to as the "donut hole"; and

    enacted substantial new provisions affecting compliance which may affect our business practices with healthcare practitioners.

        Although it is too early to determine the full effect of the Affordable Care Act, the new law appears likely to continue the downward pressure on pharmaceutical pricing, especially under the Medicare program, and may also increase our regulatory burdens and operating costs.

        In addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted. For example, in August 2011, the President signed into law the Budget Control Act of 2011, which, among other things, created the Joint Select Committee on Deficit Reduction to recommend to Congress proposals in spending reductions. The Joint Select Committee on Deficit Reduction did not achieve a targeted deficit reduction of at least $1.2 trillion for fiscal years 2012 through 2021, triggering the legislation's automatic reduction to several government programs. This includes aggregate reductions to Medicare payments to providers of 2% per fiscal year, which went into effect on April 1, 2013.

        We expect that the Affordable Care Act, as well as other state and federal healthcare reform measures that have and may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for any approved product, and could seriously harm our future revenues. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. The

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implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our products.

        Moreover, the recently enacted Drug Quality and Security Act imposes new obligations on manufacturers of pharmaceutical products related to product tracking and tracing. Among the requirements of this new legislation, manufacturers will be required to provide certain information regarding drug products to individuals and entities to which product ownership is transferred, label drug products with a product identifier, and keep certain records regarding drug products. The transfer of information to subsequent product owners by manufacturers will eventually be required to be done electronically. Manufacturers will also be required to verify that purchasers of the manufacturers' products are appropriately licensed. Further, under this new legislation, manufacturers will have drug product investigation, quarantine, disposition, and FDA and trading partner notification responsibilities related to counterfeit, diverted, stolen, and intentionally adulterated products such that they would result in serious adverse health consequences or death, as well as products that are the subject of fraudulent transactions or which are otherwise unfit for distribution such that they would be reasonably likely to result in serious health consequences or death.

Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of any products that we may develop.

        We face an inherent risk of product liability exposure related to the testing of our product candidates in human clinical trials and will face an even greater risk if we commercially sell any products that we may develop. Product liability claims may be brought against us by subjects enrolled in our clinical trials, patients, healthcare providers or others using, administering or selling our products. For example, we may be sued if any product we develop allegedly causes injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability and a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against claims that our product candidates or products that we may develop caused injuries, we could incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:

    decreased demand for any product candidates or products that we may develop;

    termination of clinical trial sites or entire trial programs;

    injury to our reputation and significant negative media attention;

    withdrawal of clinical trial participants;

    significant costs to defend the related litigation;

    substantial monetary awards to trial subjects or patients;

    loss of revenue;

    product recalls, withdrawals or labeling, marketing or promotional restrictions;

    diversion of management and scientific resources from our business operations;

    the inability to commercialize any products that we may develop; and

    a decline in our stock price.

        We currently hold $10.0 million in clinical trial liability insurance coverage, which may not adequately cover all liabilities that we may incur. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise. We intend to expand our insurance coverage for products to include the sale of commercial products if we obtain

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marketing approval for our product candidates in development, but we may be unable to obtain commercially reasonable product liability insurance for any products approved for marketing. Large judgments have been awarded in class action lawsuits based on drugs that had unanticipated side effects. A successful product liability claim or series of claims brought against us, particularly if judgments exceed our insurance coverage, could decrease our cash and adversely affect our business.

Our relationships with commercial and government customers, healthcare providers, and third-party payors and others will be subject to applicable anti-kickback, fraud and abuse, transparency and other healthcare related laws, regulations and requirements, which could expose us to criminal sanctions, civil penalties, exclusion from participation in federal healthcare programs, contractual damages and consequences, reputational harm, administrative burdens and diminished profits and future earnings.

        Healthcare providers, physicians and third-party payors play a primary role in the recommendation and prescription of any product candidates for which we obtain marketing approval. Our future arrangements with third-party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute our products for which we obtain marketing approval. There are also laws, regulations, and requirements applicable to the award and performance of federal grants and contracts. Actions resulting in violations of these laws regulations, and requirements may result in civil and criminal liability, damages and restitution, as well as exclusion from participation in federal healthcare programs, corporate integrity agreements, deferred prosecution agreements, debarment from government contracts and grants and refusal of future orders under existing contracts or contractual damages, and other consequences. Restrictions under applicable federal and state healthcare related laws and regulations, include the following:

    the federal Anti-Kickback Statute prohibits persons from, among other things, knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward, or in return for, the referral of an individual for the furnishing or arranging for the furnishing, or the purchase, lease or order, or arranging for or recommending purchase, lease or order, of any good or service for which payment may be made under a federal healthcare program such as Medicare and Medicaid;

    the civil federal False Claims Act imposes civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent; knowingly making, using or causing to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the government; conspiring to defraud the government by getting a false or fraudulent claim paid or approved by the government; or knowingly making, using or causing to be made or used a false record or statement to avoid, decrease or conceal an obligation to pay money to the federal government. Civil False Claims Act liability may be imposed for Medicare or Medicaid overpayments, for example, overpayments caused by understated rebate amounts, that are not refunded within 60 days of discovering the overpayment, even if the overpayment was not cause by a false or fraudulent act;

    the criminal federal False Claims Act imposes criminal fines or imprisonment against individuals or entities who willfully make or present a claim to the government knowing such claim to be false, fictitious or fraudulent;

    the Veterans Health Care Act requires manufacturers of covered drugs to offer them for sale on the Federal Supply Schedule, which requires compliance with applicable federal procurement laws and regulations and subjects us to contractual remedies as well as administrative, civil and criminal sanctions;

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    the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes criminal liability for, among other actions, knowingly and willfully executing a scheme to defraud any healthcare benefit program, knowingly and willfully embezzling or stealing from a health care benefit program, willfully obstructing a criminal investigation of a health care offense, or knowingly and willfully making false statements relating to healthcare matters;

    the civil monetary penalties statute imposes penalties against any person or entity who, among other things, is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent;

    HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 and its implementing regulations, also imposes obligations on certain covered entity health care providers, health plans, and health care clearinghouses as well as their business associates that perform certain services involving individually identifiable health information, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information, as well as directly applicable privacy and security standards and requirements;

    the federal Physician Sunshine Act, created under Section 6002 of the Affordable Care Act and its implementing regulations, requires manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children's Health Insurance Program (with certain exceptions) to report annually to the Centers for Medicare and Medicaid Services, or CMS, information related to payments or other "transfers of value" made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, and requires applicable manufacturers and applicable group purchasing organizations to report annually to CMS ownership and investment interests held by physicians (as defined above) and their immediate family members;

    the Foreign Corrupt Practices Act, or FCPA, prohibits any United States individual or business from paying, offering, or authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United States to comply with accounting provisions requiring the company to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations; and

    analogous or similar state, federal, and foreign laws, regulations, and requirements such as state anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers; state and foreign laws that require pharmaceutical companies to comply with the pharmaceutical industry's voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers; state and foreign laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; laws, regulations, and requirements applicable to the award and performance of federal contracts and grants and state, federal and foreign laws that govern the privacy and security of health and other information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

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        Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. For example, we must ensure that all applicable price concessions are included in prices calculated and reported to federal agencies. Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law interpreting applicable fraud and abuse or other healthcare laws and regulations. In addition, recent health care reform legislation has strengthened these laws. For example, the Affordable Care Act, among other things, amends the intent requirement of the federal anti-kickback and certain portions of the HIPAA criminal healthcare fraud statutes. A person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it. Moreover, the Affordable Care Act provides that the government may assert that a claim including items or services resulting from a violation of the federal anti-kickback statute constitutes a false or fraudulent claim for purposes of the False Claims Act.

        If our operations are found to be in violation of any of these laws or any other governmental regulations or requirements that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, imprisonment, restitution exclusion from government funded healthcare programs, such as Medicare and Medicaid, corporate integrity agreements, deferred prosecution agreements, debarment from government contracts and grants and refusal of future orders under existing contracts, contractual damages, the curtailment or restructuring of our operations and other consequences. If any of the physicians or other healthcare providers or entities with whom we expect to do business are found not to be in compliance with applicable laws, that person or entity may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs. Moreover, availability of any federal grant funds which we may receive or for which we may apply is subject to federal appropriations law. Grant funding may also be withdrawn or denied for other reasons. For instance, the National Institutes of Mental Health, or NIMH, recently decided to discontinue the funding of a Phase 1 study of CERC-501 that was to be conducted by a third party as NIMH decided the study would be unlikely to provide new information beyond what a NIMH funded Phase 2a study, conducted by the same third party, would provide.

If we fail to attract and keep management and other key personnel, as well as our board members, we may be unable to develop our product candidates or otherwise implement our business plan.

        Our ability to compete in the highly competitive biotechnology and pharmaceuticals industries depends upon our ability to attract and retain highly qualified managerial, scientific, medical and other personnel. We are highly dependent on Blake M. Paterson, M.D., our Chief Executive Officer and President and member of our board of directors. The loss of the services of Dr. Paterson could impede, delay or prevent the development of our product candidates and could negatively impact our ability to successfully implement our business plan. If we lose the services of Dr. Paterson, we may not be able to find a suitable replacement on a timely basis, or at all, and our business would likely be harmed as a result. We do not maintain a "key man" insurance policy on Dr. Paterson's life or the lives of any of our other employees. We employ all of our executive officers and key personnel on an at-will basis and their employment can be terminated by us or them at any time, for any reason and without notice. In order to retain valuable employees at our company, in addition to salary and cash incentives, we provide incentive stock options that vest over time. The value to employees of stock options that vest over time will be significantly affected by movements in our stock price that are beyond our control and may at any time be insufficient to counteract offers from other companies.

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        We may not be able to attract or retain qualified management and other key personnel in the future due to the intense competition for qualified personnel among biotechnology, pharmaceutical and other businesses. Our industry has experienced a high rate of turnover of management personnel in recent years. As such, we could have difficulty attracting experienced personnel to our company and may be required to expend significant financial resources in our employee recruitment and retention efforts. Many of the other biotechnology and pharmaceutical companies with whom we compete for qualified personnel have greater financial and other resources, different risk profiles and longer histories in the industry than we do. They also may provide more diverse opportunities and better chances for career advancement. Some of these characteristics may be more appealing to high quality candidates than that which we have to offer. If we are not able to attract and retain the necessary personnel to accomplish our business objectives, we may experience constraints that will impede significantly our ability to implement our business strategy and achieve our business objectives.

        In addition, we have scientific and clinical advisors who assist us in formulating our development and clinical strategies. These advisors are not our employees and may have commitments to, or consulting or advisory contracts with, other entities that may limit their availability to us. In addition, our advisors may have arrangements with other companies to assist those companies in developing products or technologies that may compete with ours.

If our employees, independent contractors, principal investigators, CROs, manufacturers, consultants or vendors commit fraud or other misconduct, including noncompliance with regulatory standards and requirements and insider trading, our business may experience serious adverse consequences.

        We are exposed to the risk that our employees, independent contractors, principal investigators, CROs, manufacturers, consultants and vendors may engage in fraudulent or other illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent conduct or disclosure of unauthorized activities to us that violates: (1) FDA regulations, including those laws requiring the reporting of true, complete and accurate information to the FDA, (2) manufacturing standards, (3) federal and state healthcare fraud and abuse laws and regulations or (4) laws that require the true, complete and accurate reporting of financial information or data. Specifically, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. The improper use of information obtained in the course of clinical trials could also result in significant legal sanctions and serious harm to our reputation. In addition, federal procurement laws and regulations impose substantial penalties for misconduct in connection with government contracts and require contractors to maintain a code of business conduct and ethics. In contemplation of this offering, we will adopt a Code of Business Conduct and Ethics, but it is not always possible to identify and deter misconduct by our employees and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including regulatory enforcement action, the imposition of significant criminal and civil fines, penalties, or other sanctions, including imprisonment, exclusion from participation in federal healthcare programs, and deferred prosecution and corporate integrity agreements.

        In addition, during the course of our operations, our directors, executives and employees may have access to material, nonpublic information regarding our business, our results of operations or potential transactions we are considering. In contemplation of this offering, we will adopt an Insider Trading Policy, but despite the adoption of such policy, we may not be able to prevent a director, executive or employee from trading in our common stock on the basis of, or while having access to, material,

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nonpublic information. If a director, executive or employee was to be investigated, or an action was to be brought against a director, executive or employee for insider trading, it could have a negative impact on our reputation and our stock price. Such a claim, with or without merit, could also result in substantial expenditures of time and money, and divert attention of our management team from other tasks important to the success of our business.

We may encounter difficulties in managing our growth and expanding our operations successfully.

        As we seek to advance our product candidates through clinical trials, we will need to expand our development, regulatory, manufacturing, administrative, marketing and sales capabilities or contract with third parties to provide these capabilities for us. As our operations expand, we expect that we will need to manage additional relationships with various strategic partners, suppliers and other third parties. Future growth will impose significant added responsibilities on members of management. Our future financial performance and our ability to commercialize our product candidates and to compete effectively will depend, in part, on our ability to manage any future growth effectively. To that end, we must be able to manage our development efforts and clinical trials effectively and hire, train and integrate additional management, administrative and sales and marketing personnel. The hiring, training and integration of new employees may be more difficult, costly and/or time-consuming for us because we have fewer resources than a larger organization. We may not be able to accomplish these tasks, and our failure to accomplish any of them could prevent us from successfully growing our company.

If, in the future, we are unable to establish our own sales, marketing and distribution capabilities or enter into licensing or collaboration agreements for these purposes, we may not be successful in commercializing our product candidates.

        We currently have a relatively small number of employees and do not have a sales or marketing infrastructure, and we do not have any significant sales, marketing or distribution experience. We will be opportunistic in seeking to either build our own commercial infrastructure to commercialize our product candidates and future products if and when they are approved, or enter into licensing or collaboration agreements to assist in the future development and commercialization of such products.

        To develop internal sales, distribution and marketing capabilities, we will have to invest significant amounts of financial and management resources, some of which will be committed prior to any confirmation that our product candidates will be approved. For product candidates for which we decide to perform sales, marketing and distribution functions ourselves, we could face a number of additional risks, including:

    our inability to recruit and retain adequate numbers of effective sales and marketing personnel;

    the inability of sales personnel to obtain access to physicians or educate adequate numbers of physicians on the clinical benefits of our products to achieve market acceptance;

    the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines;

    the costs associated with training sales personnel on legal compliance matters and monitoring their actions;

    liability for sales personnel failing to comply with the applicable legal requirements; and

    unforeseen costs and expenses associated with creating an independent sales and marketing organization.

        Where and when appropriate, we may elect to utilize contract sales forces or strategic partners to assist in the commercialization of our product candidates. If we enter into arrangements with third

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parties to perform sales, marketing and distribution services for our products, the resulting revenues or the profitability from these revenues to us are likely to be lower than if we had sold, marketed and distributed our products ourselves. In addition, we may not be successful in entering into arrangements with third parties to sell, market and distribute our product candidates or may be unable to do so on terms that are favorable to us. We likely will have little control over such third parties, and any of these third parties may fail to devote the necessary resources and attention to sell, market and distribute our products effectively. Such third parties may also not comply with the applicable regulatory requirements, which could potentially expose us to regulatory and legal enforcement actions.

        If we do not establish sales, marketing and distribution capabilities successfully, either on our own or in collaboration with third parties, we will not be successful in commercializing our product candidates.

Risks Related to Our Dependence on Third Parties

We may not succeed in establishing and maintaining development collaborations, which could adversely affect our ability to develop and commercialize product candidates.

        A part of our strategy is to enter into product development collaborations in the future, including collaborations with major biotechnology or pharmaceutical companies for the development or commercialization of our current and future product candidates. We face significant competition in seeking appropriate development partners and the negotiation process is time-consuming and complex. We may not succeed in our efforts to establish development collaborations or other alternative arrangements for any of our existing or future product candidates and programs because our research and development pipeline may be insufficient, our product candidates and programs may be deemed to be at too early a stage of development for collaborative effort and/or third parties may not view our product candidates and programs as having the requisite potential to demonstrate safety and efficacy.

        Furthermore, any collaborations that we enter into may not be successful. The success of our development collaborations will depend heavily on the efforts and activities of our collaborators. Collaborators generally have significant discretion in determining the efforts and resources that they will apply to these collaborations. Disagreements between parties to a development collaboration regarding clinical development and commercialization matters can lead to delays in the development process or commercializing the applicable product candidate and, in some cases, termination of the development collaboration. These disagreements can be difficult to resolve if neither of the parties has final decision making authority.

        Even if we are successful in our efforts to establish development collaborations, the terms that we agree upon may not be favorable to us and we may not be able to maintain such development collaborations if, for example, development or approval of a product candidate is delayed or sales of an approved product candidate are disappointing. Any delay in entering into development collaboration agreements related to our product candidates could delay the development and commercialization of our product candidates and reduce their competitiveness if they reach the market. Additionally, collaborations with pharmaceutical or biotechnology companies and other third parties often are terminated or allowed to expire by the other party. Any such termination or expiration would adversely affect us financially and could harm our business reputation.

        If we fail to establish and maintain additional development collaborations related to our product candidates:

    the development of certain of our current or future product candidates may be terminated or delayed;

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    our cash expenditures related to development of certain of our current or future product candidates would increase significantly and we may need to seek additional financing, which may not be available on favorable terms, or at all;

    we may be required to hire additional employees or otherwise develop expertise, such as sales and marketing expertise, for which we have not budgeted;

    we will bear all of the risk related to the development of any such product candidates;

    we may have to expend unexpected efforts and funds if we are unable to obtain the results of third party clinical trials; and

    the competitiveness of any product candidate that is commercialized could be reduced.

We rely on third parties to conduct, supervise and monitor our clinical trials. The failure of these third parties to successfully carry out their contractual duties or meet expected deadlines could substantially harm our business because we may not obtain marketing approval for or commercialize our product candidates in a timely manner or at all.

        We rely upon third-party CROs to monitor and manage data for our clinical programs. We rely on these parties for execution of our clinical trials and, while we have agreements governing their activities, we have limited influence over their actual performance and control only certain aspects of their activities. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards, and our reliance on the CROs does not relieve us of our regulatory responsibilities. We, our clinical trial sites, and our CROs are required to comply with GCP requirements, which are regulations and guidelines enforced by the FDA, the Competent Authorities of the Member States of the European Economic Area and comparable foreign regulatory authorities for all of our products in clinical development. Regulatory authorities enforce these GCP requirements through periodic inspections of trial sponsors, principal investigators and trial sites. If we, any of our CROs or clinical trial sites fail to comply with applicable GCP requirements, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications, if at all. In addition, we are required to report certain financial interests of our third-party investigators if these relationships exceed certain financial thresholds or meet other criteria. The FDA or comparable foreign regulatory authorities may question the integrity of the data from those clinical trials conducted by principal investigators who previously served or currently serve as scientific advisors or consultants to us from time to time and receive cash compensation in connection with such services or otherwise receive compensation from us that could be deemed to impact study outcome, proprietary interests in a product candidate, certain company equity interests, or significant payments of other sorts. We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical trials complies with GCP requirements. In addition, we must conduct our clinical trials with product produced under applicable GMP requirements. Failure to comply with these regulations may require us to repeat preclinical and clinical trials, which would delay the marketing approval process.

        Our CROs and clinical trial sites are not our employees, and, except for remedies available to us under our agreements with such CROs and clinical trial sites, we cannot control whether or not they devote sufficient time and resources to our ongoing clinical, nonclinical and preclinical programs. These CROs and clinical trial sites may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials or other drug development activities that could harm our competitive position. If CROs or clinical trial sites do not successfully carry out their contractual duties or obligations or meet expected deadlines, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols, regulatory requirements or for other reasons, our clinical trials may be extended, delayed or terminated

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and we may not be able to obtain marketing approval for or successfully commercialize our product candidates or we may be subject to regulatory enforcement actions. As a result, our results of operations and the commercial prospects for our product candidates would be harmed, our costs could increase and our ability to generate revenues could be delayed. To the extent we are unable to successfully identify and manage the performance of third-party service providers in the future, our business may be adversely affected.

        Switching or adding CROs involves substantial cost and requires extensive management time and focus. In addition, there is a natural transition period when a new CRO commences work. As a result, delays occur, which can materially impact our ability to meet our desired clinical development timelines. Though we carefully manage our relationships with our CROs, there can be no assurance that we will not encounter similar challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, prospects, financial condition and results of operations.

We use third parties to manufacture all of our product candidates. This may increase the risk that we will not have sufficient quantities of our product candidates to conduct our clinical trials or such quantities at an acceptable cost, which could result in the delay, prevention, or impairment of clinical development and commercialization of our product candidates.

        We do not own or operate, and have no plans to establish, any manufacturing facilities for our product candidates. We have limited personnel with experience in drug manufacturing and we lack the resources and the capabilities to manufacture any of our product candidates on a clinical or commercial scale.

        We currently outsource all manufacturing of our product candidates to third parties typically without any guarantee that there will be sufficient supplies to fulfill our requirements or that we may obtain such supplies on acceptable terms. Any delays in obtaining adequate supplies with respect to our product candidates may delay the development or commercialization of our other product candidates.

        In addition, we do not currently have any agreements with third-party manufacturers for the long-term commercial supply of our product candidates. We may be unable to enter agreements for commercial supply with third-party manufacturers, or may be unable to do so on acceptable terms. Even if we enter into these agreements, the various manufacturers of each product candidate will likely be single source suppliers to us for a significant period of time.

        The facilities used by our contract manufacturers to manufacture our product candidates must be approved by the FDA pursuant to inspections that will be conducted after we submit our NDA to the FDA. While we are ultimately responsible for the manufacture of our product candidates, other than through our contractual arrangements, we do not control the manufacturing process of, and are completely dependent on, our contract manufacturing partners for compliance with the regulatory requirements, known as GMP requirements, for manufacture of both active drug substances and finished drug products for clinical supply and eventually for commercial supply, if we receive regulatory approval. If our contract manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA or other regulatory authorities, we will not be able to secure and/or maintain regulatory approval for their manufacturing facilities. Failure of our contract manufacturers to comply with the applicable regulatory requirements may also subject us to regulatory enforcement actions. In addition, other than through our contractual agreements, we have no control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or a comparable foreign regulatory authority does not approve these facilities for the manufacture of our product candidates or if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain marketing approval for or market our product candidates, if approved.

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        Reliance on third-party manufacturers subjects us to risks that would not affect us if we manufactured the product candidates ourselves, including:

    reliance on the third parties for regulatory compliance and quality assurance;

    the possible breach of the manufacturing agreements by the third parties because of factors beyond our control;

    the possibility of termination or nonrenewal of the agreements by the third parties because of our breach of the manufacturing agreement or based on their own business priorities; and

    the disruption and costs associated with changing suppliers, including additional regulatory filings.

        Our product candidates may compete with other products and product candidates for access to manufacturing facilities. There are a limited number of manufacturers that operate under GMP regulations and that are both capable of manufacturing for us and willing to do so. If our existing third-party manufacturers, or the third parties that we engage in the future to manufacture a product for commercial sale or for our clinical trials, should cease to continue to do so for any reason, we likely would experience delays in obtaining sufficient quantities of our product candidates for us to meet commercial demand or to advance our clinical trials while we identify and qualify replacement suppliers. If for any reason we are unable to obtain adequate supplies of our product candidates or the drug substances used to manufacture them, it will be more difficult for us to develop our product candidates and compete effectively.

        Our suppliers are subject to regulatory requirements, covering manufacturing, testing, quality control, manufacturing, and record keeping relating to our product candidates, and subject to ongoing inspections by the regulatory agencies. Failure by any of our suppliers to comply with applicable regulations may result in long delays and interruptions to our manufacturing capacity while we seek to secure another supplier that meets all regulatory requirements, as well as market disruption related to any necessary recalls or other corrective actions.

Risks Related to Intellectual Property

If we are unable to obtain or maintain intellectual property rights, or if the scope of patent protection is not sufficiently broad, competitors could develop and commercialize products similar or identical to ours, and we may not be able to compete effectively in our market.

        Our success depends in significant part on our and our licensors', licensees' or collaborators' ability to establish, maintain and protect patents and other intellectual property rights and operate without infringing the intellectual property rights of others. We have filed numerous patent applications both in the United States and in foreign jurisdictions to obtain patent rights to inventions we have discovered. We have also licensed from third parties rights to patent portfolios.

        The patent prosecution process is expensive and time-consuming, and we and our current or future licensors, licensees or collaborators may not be able to prepare, file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we or our licensors, licensees or collaborators will fail to identify patentable aspects of inventions made in the course of development and commercialization activities before it is too late to obtain patent protection on them. Moreover, in some circumstances, we may not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the patents, covering technology that we license from or license to third parties and are reliant on our licensors, licensees or collaborators. Therefore, these patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business. If our current or future licensors, licensees or collaborators fail to establish, maintain or protect such patents and other intellectual property rights, such rights may be reduced or eliminated. If our licensors, licensees or collaborators are not fully cooperative or disagree

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with us as to the prosecution, maintenance or enforcement of any patent rights, such patent rights could be compromised.

        The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has in recent years been the subject of much litigation. As a result, the issuance, scope, validity, enforceability and commercial value of our and our current or future licensors', licensees' or collaborators' patent rights are highly uncertain. Our and our licensors', licensees' or collaborators' pending and future patent applications may not result in patents being issued which protect our technology or products, in whole or in part, or which effectively prevent others from commercializing competitive technologies and products. The patent examination process may require us or our licensors, licensees or collaborators to narrow the scope of the claims of our or our licensors', licensees' or collaborators' pending and future patent applications, which may limit the scope of patent protection that may be obtained. Our and our licensors', licensees' or collaborators' patent applications cannot be enforced against third parties practicing the technology claimed in such applications unless and until a patent issues from such applications, and then only to the extent the issued claims cover the technology.

        Furthermore, given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours. We expect to seek extensions of patent terms where these are available in any countries where we are prosecuting patents. This includes in the United States under the Drug Price Competition and Patent Term Restoration Act of 1984, which permits a patent term extension of up to five years beyond the expiration of the patent. However the applicable authorities, including the FDA in the United States, and any equivalent regulatory authority in other countries, may not agree with our assessment of whether such extensions are available, and may refuse to grant extensions to our patents, or may grant more limited extensions than we request. If this occurs, our competitors may take advantage of our investment in development and clinical trials by referencing our clinical and preclinical data and launch their product earlier than might otherwise be the case.

If we breach the license agreements related to our product candidates, we could lose the ability to develop and commercialize our product candidates.

        Our commercial success depends upon our ability, and the ability of our licensors and collaborators, to develop, manufacture, market and sell our product candidates and use our and our licensors' or collaborators' proprietary technologies without infringing the proprietary rights of third parties. If we fail to comply with our obligations in the agreements under which we license intellectual property rights from third parties or otherwise experience disruptions to our business relationships with our licensors, we could lose the ability to continue the development and commercialization of our product candidates or face other penalties under these agreements. We have entered into exclusive license agreements with Merck & Co., Inc. and its affiliates, or Merck, pursuant to which Merck has granted us rights to the compounds used in CERC-301 and the COMTi platform, including CERC-406. We have also entered into exclusive license agreements with Lilly pursuant to which Lilly has granted us rights to the compounds used in CERC-501. If we fail to comply with the obligations under these agreements, including payment terms, Merck and Lilly may have the right to terminate any of these agreements, in which event we may not be able to develop, market or sell CERC-301, CERC-501 or any product candidate developed from the COMTi platform, including CERC-406. Such an occurrence could materially adversely affect the value of the product candidate being developed under any such agreement. Termination of these agreements or reduction or elimination of our rights under these agreements may result in our having to negotiate new or reinstated agreements, which may not be available to us on equally favorable terms, or at all, or cause us to lose our rights under these agreements, including our rights to intellectual property or technology important to our development programs. Any of these occurrences may harm our business, financial condition and prospects significantly.

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Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

        Periodic maintenance and annuity fees on any issued patent are due to be paid to the United States Patent and Trademark Office, or USPTO, and foreign patent agencies in several stages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Non-compliance events that could result in abandonment or lapse of a patent or patent application include failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. If we or our licensors or collaborators fail to maintain the patents and patent applications covering our product candidates, our competitors might be able to enter the market, which would have a material adverse effect on our business.

Third parties may initiate legal proceedings against us alleging that we infringe their intellectual property rights or we may initiate legal proceedings against third parties to challenge the validity or scope of intellectual property rights controlled by third parties, the outcome of which would be uncertain and could have a material adverse effect on the success of our business.

        Third parties may initiate legal proceedings against us or our licensors or collaborators alleging that we or our licensors or collaborators infringe their intellectual property rights or we or our licensors or collaborators may initiate legal proceedings against third parties to challenge the validity or scope of intellectual property rights controlled by third parties, including in oppositions, interferences, reexaminations, inter partes reviews or derivation proceedings before the United States or other jurisdictions. These proceedings can be expensive and time-consuming and many of our or our licensors' or collaborators' adversaries in these proceedings may have the ability to dedicate substantially greater resources to prosecuting these legal actions than we or our licensors or collaborators can.

        An unfavorable outcome could require us or our licensors or collaborators to cease using the related technology or developing or commercializing our product candidates, or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us or our licensors or collaborators a license on commercially reasonable terms or at all. Even if we or our licensors or collaborators obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us or our licensors or collaborators. In addition, we could be found liable for monetary damages, including treble damages and attorneys' fees, if we are found to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our product candidates or force us to cease some of our business operations, which could materially harm our business.

We may become involved in lawsuits to protect or enforce our intellectual property, which could be expensive, time-consuming and unsuccessful and have a material adverse effect on the success of our business.

        Third parties may infringe our or our licensors' or collaborators' patents or misappropriate or otherwise violate our or our licensors' or collaborators' intellectual property rights. In the future, we or our licensors or collaborators may initiate legal proceedings to enforce or defend our or our licensors' or collaborators' intellectual property rights, to protect our or our licensors' or collaborators' trade secrets or to determine the validity or scope of intellectual property rights we own or control. Also, third parties may initiate legal proceedings against us or our licensors or collaborators to challenge the

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validity or scope of intellectual property rights we own or control. The proceedings can be expensive and time-consuming and many of our or our licensors' or collaborators' adversaries in these proceedings may have the ability to dedicate substantially greater resources to prosecuting these legal actions than we or our licensors or collaborators can. Accordingly, despite our or our licensors' or collaborators' efforts, we or our licensors or collaborators may not prevent third parties from infringing upon or misappropriating intellectual property rights we own or control, particularly in countries where the laws may not protect those rights as fully as in the United States. Litigation could result in substantial costs and diversion of management resources, which could harm our business and financial results. In addition, in an infringement proceeding, a court may decide that a patent owned by or licensed to us is invalid or unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our or our licensors' or collaborators' patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our or our licensors' or collaborators' patents at risk of being invalidated, held unenforceable or interpreted narrowly.

        Third party preissuance submission of prior art to the USPTO, or opposition, derivation, reexamination, inter partes review or interference proceedings, or other preissuance or post-grant proceedings in the United States or other jurisdictions provoked by third parties or brought by us or our licensors or collaborators may be necessary to determine the priority of inventions with respect to our or our licensors' or collaborators' patents or patent applications. An unfavorable outcome could require us or our licensors or collaborators to cease using the related technology and commercializing our product candidates, or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us or our licensors or collaborators a license on commercially reasonable terms or at all. Even if we or our licensors or collaborators obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us or our licensors or collaborators. In addition, if the breadth or strength of protection provided by our or our licensors' or collaborators' patents and patent applications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates. Even if we successfully defend such litigation or proceeding, we may incur substantial costs and it may distract our management and other employees. We could be found liable for monetary damages, including treble damages and attorneys' fees if we are found to have willfully infringed a patent.

        Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our units, Warrants or shares of our common stock.

We may be subject to claims by third parties asserting that our employees or we have misappropriated their intellectual property, or claiming ownership of what we regard as our own intellectual property.

        Many of our employees, including our senior management, were previously employed at universities or at other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Some of these employees executed proprietary rights, non-disclosure and non-competition agreements in connection with such previous employment. We may be subject to claims that we or these employees have used or disclosed confidential information or intellectual property, including trade secrets or other proprietary information, of any such employee's former employer. In addition, we may be subject to claims that former employees, collaborators, or other third parties have an ownership interest in our patents or other intellectual property. While it is our policy to require our employees and contractors who may be involved in the development of intellectual property

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to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement to each party who in fact develops intellectual property that we regard as our own. We could be subject to ownership disputes arising, for example, from conflicting obligations of consultants or others who are involved in developing our product candidates. Litigation may be necessary to defend against these claims.

        If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel or sustain damages. Such intellectual property rights could be awarded to a third party, and we could be required to obtain a license from such third party to commercialize our technology or products. Such a license may not be available on commercially reasonable terms or at all. Even if we successfully prosecute or defend against such claims, litigation could result in substantial costs and distract management.

Our inability to protect our confidential information and trade secrets would harm our business and competitive position.

        In addition to seeking patents for some of our technology and products, we also rely on trade secrets, including unpatented know-how, technology and other proprietary information, to maintain our competitive position. Though we seek to protect these trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors and other third parties, as well as by entering into confidentiality and invention or patent assignment agreements with our employees and consultants, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts both within and outside the United States may be less willing or unwilling to protect trade secrets. If a competitor lawfully obtained or independently developed any of our trade secrets, we would have no right to prevent such competitor from using that technology or information to compete with us, which could harm our competitive position.

Changes in patent law could diminish the value of patents in general, thereby impairing our ability to protect our product candidates.

        As is the case with other biotechnology and pharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biopharmaceutical industry involve technological and legal complexity, and obtaining and enforcing biopharmaceutical patents is costly, time-consuming, and inherently uncertain. The Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our and our licensors' or collaborators' ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by Congress, the federal courts, and the USPTO the laws and regulations governing patents could change in unpredictable ways that would weaken our and our licensors' or collaborators' ability to obtain new patents or to enforce existing patents and patents we and our licensors or collaborators may obtain in the future. Recent patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our and our licensors' or collaborators' patent applications and the enforcement or defense of our or our licensors' or collaborators' issued patents. On September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The Leahy-Smith Act includes a number of significant changes to United States patent law. These include provisions that affect the way patent applications are prosecuted and may also affect patent litigation. The USPTO recently developed new regulations and

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procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions, only became effective on March 16, 2013. Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on the operation of our business. However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our or our licensors' or collaborators' patent applications and the enforcement or defense of our or our licensors' or collaborators' issued patents, all of which could have a material adverse effect on our business and financial condition.

We may not be able to protect our intellectual property rights throughout the world.

        Filing, prosecuting, enforcing and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and our or our licensors' or collaborators' intellectual property rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we and our licensors or collaborators may not be able to prevent third parties from practicing our and our licensors' or collaborators' inventions in all countries outside the United States, or from selling or importing products made using our and our licensors' or collaborators' inventions in and into the United States or other jurisdictions. Competitors may use our and our licensors' or collaborators' technologies in jurisdictions where we have not obtained patent protection to develop their own products and further, may export otherwise infringing products to territories where we and our licensors or collaborators have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our product candidates and our and our licensors' or collaborators' patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

        Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to biopharmaceuticals, which could make it difficult for us and our licensors or collaborators to stop the infringement of our and our licensors' or collaborators' patents or marketing of competing products in violation of our and our licensors' or collaborators' proprietary rights generally. Proceedings to enforce our and our licensors' or collaborators' patent rights in foreign jurisdictions could result in substantial costs and divert our and our licensors' or collaborators' efforts and attention from other aspects of our business, could put our and our licensors' or collaborators' patents at risk of being invalidated or interpreted narrowly and our and our licensors' or collaborators' patent applications at risk of not issuing and could provoke third parties to assert claims against us or our licensors or collaborators. We or our licensors or collaborators may not prevail in any lawsuits that we or our licensors or collaborators initiate and the damages or other remedies awarded, if any, may not be commercially meaningful.

        The requirements for patentability may differ in certain countries, particularly developing countries. For example, unlike other countries, China has a heightened requirement for patentability, and specifically requires a detailed description of medical uses of a claimed drug. In India, unlike the United States, there is no link between regulatory approval of a drug and its patent status. Furthermore, generic or biosimilar drug manufacturers or other competitors may challenge the scope, validity or enforceability of our or our licensors' or collaborators' patents, requiring us or our licensors or collaborators to engage in complex, lengthy and costly litigation or other proceedings. Generic or biosimilar drug manufacturers may develop, seek approval for, and launch biosimilar versions of our products. In addition to India, certain countries in Europe and developing countries, including China, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third

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parties. In those countries, we and our licensors or collaborators may have limited remedies if patents are infringed or if we or our licensors or collaborators are compelled to grant a license to a third party, which could materially diminish the value of those patents. This could limit our potential revenue opportunities. Accordingly, our and our licensors' or collaborators' efforts to enforce intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we own or license.

Risks Related to this Offering and the Offered Securities

We do not know whether an active, liquid and orderly trading market will develop for the offered securities or what the market price of the offered securities will be and as a result it may be difficult for you to sell your units, Warrants and shares of our common stock.

        Prior to this offering, no market for the units, Warrants or shares of our common stock existed and an active trading market these securities may never develop or be sustained following this offering. We will determine the initial public offering price for our units through negotiations with the underwriters, and the negotiated price may not be indicative of the market price of the units, Warrants or shares of our common stock after this offering. The market value of the units, Warrants or shares of our common stock may decrease from the initial public offering price. As a result of these and other factors, you may be unable to resell your units, Warrants or shares of our common stock at or above the initial public offering price, or at all. The lack of an active market may impair your ability to sell your units, Warrants or shares at the time you wish to sell them or at a price that you consider reasonable. The lack of an active market may also reduce the fair market value of your units, Warrants or shares. Furthermore, an inactive market may also impair our ability to raise capital by selling the units, Warrants or shares of our common stock and may impair our ability to enter into strategic collaborations or acquire companies or products by using our units, Warrants or shares of common stock as consideration.

The market price of our stock may be volatile, and you could lose all or part of your investment.

        The trading price of the units, Warrants and shares of our common stock following this offering is likely to be highly volatile and subject to wide fluctuations in response to various factors, some of which we cannot control. As a result of this volatility, you may not be able to sell your units, Warrants or common stock at or above the initial public offering price, or at all. In addition to the factors discussed in this "Risk Factors" section and elsewhere in this prospectus, these factors include:

    the development status of our product candidates, and when any of our product candidates receive marketing approval;

    our decision to initiate a clinical trial, not to initiate a clinical trial or to terminate an existing clinical trial;

    our failure to commercialize our product candidates, if approved;

    the success of competitive products or technologies;

    regulatory actions with respect to our products or our competitors' products;

    actual or anticipated changes in our growth rate relative to our competitors;

    announcements by us or our competitors of significant acquisitions, strategic collaborations, joint ventures, collaborations or capital commitments;

    results of preclinical studies and clinical trials of our product candidates or those of our competitors;

    regulatory or legal developments in the United States and other countries;

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    developments or disputes concerning patent applications, issued patents or other proprietary rights;

    the recruitment or departure of key personnel;

    the level of expenses related to any of our product candidates or clinical development programs;

    the results of our efforts to discover, develop, in-license or acquire additional product candidates or products;

    actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts;

    the performance of third parties on whom we rely to manufacture our products and product candidates, supply API and conduct our clinical trials, including their ability to comply with regulatory requirements;

    variations in our financial results or those of companies that are perceived to be similar to us;

    variations in the level of expenses related to our product candidates or preclinical and clinical development programs, including relating to the timing of invoices from, and other billing practices of, our CROs and clinical trial sites;

    fluctuations in the valuation of companies perceived by investors to be comparable to us;

    unit, Warrant or share price and volume fluctuations attributable to inconsistent trading volume levels of our units, Warrants or shares;

    announcement or expectation of additional financing efforts;

    sales of our units, Warrants or shares of our common stock by us, our insiders or our other securityholders;

    changes in the structure of healthcare payment systems;

    changes in operating performance and stock market valuations of other pharmaceutical companies;

    market conditions in the pharmaceutical and biotechnology sectors;

    our execution of collaborative, co-promotion, licensing or other arrangements, and the timing of payments we may make or receive under these arrangements;

    the public's response to press releases or other public announcements by us or third parties, including our filings with the Securities and Exchange Commission, or SEC, and announcements relating to litigation or other disputes, strategic transactions or intellectual property impacting us or our business;

    the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;

    changes in financial estimates by any securities analysts who follow our units, Warrants or shares of common stock, our failure to meet these estimates or failure of those analysts to initiate or maintain coverage of our units, Warrants or shares of common stock;

    ratings downgrades by any securities analysts who follow our units, Warrants or shares of common stock;

    the development and sustainability of an active trading market for our units, Warrants or shares of common stock;

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    future sales of our units, Warrants or shares of common stock by our officers, directors and significant stockholders;

    other events or factors, including those resulting from war, incidents of terrorism, natural disasters or responses to these events;

    changes in accounting principles; and

    general economic, industry and market conditions.

        In addition, the stock market in general, and the market for biotechnology companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our units, Warrants or shares of common stock, regardless of our actual operating performance. The realization of any of the above risks or any of a broad range of other risks, including those described in this "Risk Factors" section, could have a dramatic and material adverse impact on the market price of our units, Warrants or shares of common stock.

We are an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and will be able to avail ourselves of reduced disclosure requirements applicable to emerging growth companies, which could make our units, Warrants or shares of common stock less attractive to investors and adversely affect the market price of our units, Warrants or shares of common stock.

        For so long as we remain an "emerging growth company" as defined in the JOBS Act, we may take advantage of certain exemptions from various requirements applicable to public companies that are not "emerging growth companies" including:

    the provisions of Section 404(b) of the Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley Act, requiring that our independent registered public accounting firm provide an attestation report on the effectiveness of our internal control over financial reporting;

    the "say on pay" provisions (requiring a non-binding shareholder vote to approve compensation of certain executive officers) and the "say on golden parachute" provisions (requiring a non-binding shareholder vote to approve golden parachute arrangements for certain executive officers in connection with mergers and certain other business combinations) of the Dodd-Frank Act and some of the disclosure requirements of the Dodd-Frank Act relating to compensation of our chief executive officer;

    the requirement to provide detailed compensation discussion and analysis in proxy statements and reports filed under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and instead provide a reduced level of disclosure concerning executive compensation; and

    any rules that the Public Company Accounting Oversight Board may adopt requiring mandatory audit firm rotation or a supplement to the auditor's report on the financial statements.

        We may take advantage of these exemptions until we are no longer an "emerging growth company." We would cease to be an "emerging growth company" upon the earliest of: (i) the first fiscal year following the fifth anniversary of this offering; (ii) the first fiscal year after our annual gross revenues are $1 billion or more; (iii) the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt securities; or (iv) as of the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million as of the end of the second quarter of that fiscal year.

        Although we are still evaluating the JOBS Act, we currently intend to take advantage of some, but not all, of the reduced regulatory and reporting requirements that will be available to us so long as we qualify as an "emerging growth company." For example, we have irrevocably elected not to take

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advantage of the extension of time to comply with new or revised financial accounting standards available under Section 102(b) of the JOBS Act. Our independent registered public accounting firm will not be required to provide an attestation report on the effectiveness of our internal control over financial reporting so long as we qualify as an "emerging growth company," which may increase the risk that material weaknesses or significant deficiencies in our internal control over financial reporting go undetected. Likewise, so long as we qualify as an "emerging growth company," we may elect not to provide you with certain information, including certain financial information and certain information regarding compensation of our executive officers, that we would otherwise have been required to provide in filings we make with the SEC which may make it more difficult for investors and securities analysts to evaluate our company. Even after we no longer qualify as an emerging growth company, we may still qualify as a "smaller reporting company," which would allow us to take advantage of many of the same exemptions from disclosure requirements, including not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in this prospectus and our periodic reports and proxy statements. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our units, Warrants or shares of common stock less attractive as a result, there may be a less active trading market for our units, Warrants or shares of common stock, and the securities prices may be more volatile and may decline.

Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.

        Upon closing of this offering, our executive officers, directors and 5% stockholders and their affiliates will beneficially own approximately 8.8% of our outstanding voting stock. As a result, these stockholders will have significant influence and may be able to determine all matters requiring stockholder approval. For example, these stockholders may be able to control elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction. This concentration of ownership could delay or prevent any acquisition of our company on terms that other stockholders may desire.

We have broad discretion in the use of the net proceeds from this offering and may not apply the proceeds in ways that increase the value of your investment.

        Our management will have broad discretion in the application of the net proceeds from this offering, including for any of the purposes described in the section entitled "Use of Proceeds," and you will be relying on the judgment of our management regarding the application of these proceeds. We intend to use the net proceeds from this offering for:

    Phase 2 clinical development of CERC-301 and CERC-501;

    research and development under our COMTi platform, including the selection of lead candidates and preclinical research for CERC-406; and

    working capital and other general corporate purposes.

        In addition, a portion of the net proceeds may also be used to acquire or license products, technologies or businesses. However, we do not currently have any specific plans for use of the net proceeds from this offering, nor have we performed studies or made preliminary decisions with respect to the best use of the capital resources resulting from this offering. As such, our management will have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that do not necessarily improve our operating results or enhance the value of our units, Warrants or shares of common stock. You will be relying on the judgment of our management concerning these uses and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. The failure of our management to apply

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these funds effectively could result in unfavorable returns and uncertainty about our prospects, each of which could cause the price of our units, Warrants or shares of common stock to decline.

We may be subject to securities litigation, which is expensive and could divert management attention.

        The market price of our units, Warrants and shares of common stock may be volatile, and in the past, companies that have experienced volatility in the market price of their securities have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management's attention from other business concerns, which could seriously harm our business. Any adverse determination in litigation could also subject us to significant liabilities.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our securities prices and trading volume could decline.

        The trading market for our units, Warrants and shares of common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If no securities or industry analysts commence coverage of our company, the trading price for our units, Warrants and shares of common stock would be negatively impacted. If we obtain securities or industry analyst coverage and if one or more of the analysts who covers us downgrades our units, Warrants and shares of common stock or publishes inaccurate or unfavorable research about our business, our securities prices would likely decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our units, Warrants and shares of common stock could decrease, which could cause our securities prices and trading volume to decline.

Future sales of our units, Warrants and shares of common stock may depress our stock price.

        Sales of a substantial number of our units, Warrants or shares of our common stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of any of the offered securities intend to sell such securities, could reduce the market price of our units, Warrants and shares of common stock. After this offering, we will have outstanding 8,860,912 shares of common stock based on the number of shares outstanding as of June 30, 2015, assuming (i) no exercise of the underwriters' over-allotment option; (ii) the exclusion of the 4,230,769 shares of our common stock issuable upon exercise of the Class A Warrants sold in this offering and the 2,115,384 shares of our common stock issuable upon exercise of the Class B Warrants sold in this offering; and (iii) the conversion of all outstanding shares of our convertible preferred stock into 3,980,422 shares of common stock immediately prior to the closing of this offering. 4,230,769 shares will be eligible for resale on the public market immediately, and 4,630,143 of the shares may be sold after the expiration of lock-up agreements or other similar contractual commitments restricting the sale of such shares at least 180 days after the date of this prospectus pursuant to Rule 144 or Rule 701 under the Securities Act of 1933, as amended, or the Securities Act, unless held by an affiliate of ours, as more fully described in the section entitled "Shares Eligible for Future Sale."

        We also intend to register all shares of common stock that we may issue after this offering under our equity compensation plans. Once we register these shares, they can be freely sold in the public market upon issuance, subject to the lock-up agreements described above and in the section entitled "Underwriting—Lock-Up Agreements."

        If a large number of shares of our common stock or securities convertible into our common stock are sold in the public market after they become eligible for sale, the sales could reduce the trading price of our common stock and impede our ability to raise future capital.

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We will incur increased costs as a result of operating as a public company, and our management will devote substantial time to new compliance initiatives and corporate governance practices.

        As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company, and these expenses may increase even more after we are no longer an "emerging growth company." We will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Protection Act, as well as rules adopted, and to be adopted, by the SEC, the NASDAQ Capital Market and other applicable securities rules and regulations imposed on public companies, including the establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, we expect these rules and regulations to substantially increase our legal and financial compliance costs and to make some activities more time-consuming and costly. The increased costs will increase our net loss. For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to incur substantial costs to maintain sufficient coverage. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers.

        We estimate the additional annual cost that we will incur as a result of our public company reporting obligations is $2.0 million. However, because these rules and regulations are often subject to varying interpretations, it is difficult to accurately estimate or predict the amount or timing of these additional costs. Further, the lack of specificity of many of the rules and regulations may result in an application in practice that may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

If you purchase offered securities sold in this offering, you will incur immediate and substantial dilution.

        If you purchase offered securities in this offering, you will incur immediate and substantial dilution in the pro forma as adjusted amount of $4.20 per unit, assuming an initial public offering price of $6.50 per unit, which is the midpoint of the price range set forth on the cover page of this prospectus, because you will pay a price per unit that substantially exceeds the book value of our tangible assets after subtracting our liabilities. Moreover, investors who purchase offered securities in this offering will contribute approximately 35% of our total funding to date but will own only approximately 48% of our outstanding shares after giving effect to this offering. In addition, you may also experience additional dilution if the underwriters exercise their over-allotment option, upon future equity issuances, including upon conversion of any outstanding debt, or the exercise of stock options to purchase common stock granted to our employees, consultants and directors under our stock option and equity incentive plans. Please see the section entitled "Dilution."

Future sales and issuances of our units, Warrants or shares of common stock or rights to purchase common stock, including pursuant to our equity incentive plans, could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall.

        We expect that significant additional capital may be needed in the future to continue our planned operations, including conducting clinical trials, commercialization efforts, expanded research and development activities and costs associated with operating a public company. To raise capital, we may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell common stock, convertible securities or other equity securities in more than one transaction, investors may be materially diluted by subsequent sales. Such sales may also result in material dilution to our existing stockholders, and new investors

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could gain rights, preferences and privileges senior to the holders of our units, Warrants or shares of common stock, including the offered securities sold in this offering.

The Warrants are a risky investment. You may be unable to exercise your Warrants for a profit.

        The amount paid for the units in this offering in excess of the value of our shares of common stock represents the value of your investment in the Warrants. The value of the Warrants will depend on the value of our common stock, which will depend on factors related and unrelated to the success of our clinical development program and cannot be predicted at this time. The Class A Warrants will have an exercise period of 36 months and the Class B Warrants will have an exercise period of 18 months.

        If the price of our units or shares of common stock does not increase to an amount sufficiently above the exercise price of the Warrants during the exercise periods of the Warrants, you may be unable to recover any of your investment in the Warrants. There can be no assurance that any of the factors that could impact the trading price of our units or common stock will result in the trading price increasing to an amount that will exceed the exercise price or the price required for you to achieve a positive return on your investment in the Warrants.

The Warrants included in this offering may not have any value.

        The Class A Warrants will expire on the 36-month anniversary of the closing of the offering. The Class B Warrants will expire on the 18-month anniversary of the closing of the offering. In the event our common stock price does not exceed the exercise price of the Warrants during the period in which the Warrants are exercisable, the Warrants may not have any value.

Holders of the Warrants will have no rights as common stockholders until they acquire our common stock.

        Until you acquire shares of our common stock upon exercise of the Warrants, you will have no rights with respect to our common stock issuable upon exercise of the Warrants, including the right to receive dividend payments, vote or respond to tender offers. Upon exercise of your Warrants, you will be entitled to exercise the rights of a common stockholder only as to matters for which the record date occurs after the exercise date.

Although we are required to use our best efforts to have an effective registration statement covering the issuance of the shares of common stock underlying the Warrants at the time that holders of our Warrants exercise their Warrants, we cannot guarantee that a registration statement will be effective, in which case holders of our Warrants may not be able to receive freely tradable shares of our common stock upon exercise of the Warrants.

        Holders of our Warrants will be able to exercise the Warrants and receive freely tradable shares only if (i) a current registration statement under the Securities Act relating to the shares of our common stock underlying the Warrants is then effective, or an exemption from such registration is available, and (ii) such shares of our common stock are qualified for sale or exempt from qualification under the applicable securities laws of the states in which the various holders of Warrants reside. Although we have undertaken in the Warrants, and therefore have a contractual obligation, to use our best efforts to maintain a current registration statement covering the shares of common stock underlying the Warrants following completion of this offering to the extent required by federal securities laws, and we intend to comply with our undertaking, we may not be able to do so. If we are not able to do so, holders may not be able to exercise their Warrants and receive freely tradable shares of our common stock but rather may only be able to receive restricted shares upon exercise. In addition, we have agreed to use our best efforts to register the shares of our common stock underlying the Warrants under the blue sky laws of the states of residence of the existing holders of the Warrants, to the extent an exemption is not available. The value of the Warrants may be greatly reduced if a

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registration statement covering the shares of our common stock issuable upon exercise of the Warrants is not kept current or if the securities are not qualified, or exempt from qualification, in the states in which the holders of Warrants reside.

Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.

        Upon the closing of this offering, we will become subject to the periodic reporting requirements of the Exchange Act. We designed our disclosure controls and procedures to reasonably assure that information we must disclose in reports we file or submit under the Exchange Act is accumulated and communicated to management, and recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

        These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected.

Our amended and restated certificate of incorporation that will become effective upon the Closing of this offering will provide that the Court of Chancery of the State of Delaware is the sole and exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our stockholders' ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

        Our amended and restated certificate of incorporation that will become effective upon the Closing of this offering will provide that the Court of Chancery of the State of Delaware is the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the company; (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the company to the company or the company's stockholders; (iii) any action asserting a claim against the company arising pursuant to any provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws, each of which will become effective upon the closing of this offering; or (iv) any action asserting a claim against the company governed by the internal affairs doctrine. The choice of forum provision may limit a stockholder's ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees. Alternatively, if a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition.

Some provisions of our charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would benefit our stockholders and may prevent attempts by our stockholders to replace or remove our current management.

        Provisions in our amended and restated certificate of incorporation and amended and restated bylaws that will become effective immediately prior to the closing of this offering, as well as provisions of Delaware law, could make it more difficult for a third party to acquire us or increase the cost of acquiring us, even if doing so would benefit our stockholders, or remove our current management. These provisions include:

    authorizing the issuance of "blank check" preferred stock, the terms of which we may establish and shares of which we may issue without stockholder approval;

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    providing for a classified board of directors, with each director serving a staggered three-year term;

    prohibiting cumulative voting in the election of directors, which would otherwise allow for less than a majority of stockholders to elect director candidates;

    prohibiting stockholder action by written consent, thereby requiring all stockholder actions to be taken at a meeting of our stockholders;

    eliminating the ability of stockholders to call a special meeting of stockholders; and

    establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon at stockholder meetings.

        These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, who are responsible for appointing the members of our management. Because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, or the DGCL, which may discourage, delay or prevent someone from acquiring us or merging with us whether or not it is desired by or beneficial to our stockholders. Under the DGCL, a corporation may not, in general, engage in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock for three years or, among other things, the board of directors has approved the transaction. Any provision of our amended and restated certificate of incorporation or amended and restated bylaws or Delaware law that has the effect of delaying or deterring a change of control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our securities.

We have never paid cash dividends on our capital stock, and we do not anticipate paying any cash dividends in the foreseeable future.

        The continued operation and expansion of our business will require substantial funding. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business. Accordingly, we do not anticipate that we will pay any cash dividends on shares of our common stock for the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our board of directors and will depend upon results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law and other factors our board of directors deems relevant. Accordingly, if you purchase units, of which shares of our common stock are a component, in this offering, realization of a gain on your investment will depend on the appreciation of the price of our common stock, which may never occur. Investors seeking cash dividends in the foreseeable future should not purchase our units.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

        This prospectus contains forward-looking statements that reflect our management's beliefs and views with respect to future events and are subject to substantial risks and uncertainties. All statements, other than statements of historical fact, contained in this prospectus, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management, are forward- looking statements. The words "anticipate," "believe," "estimate," "expect," "intend," "may," "plan," "predict," "project," "target," "potential," "will," "would," "could," "should," "continue" or the negative of those terms and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

        The forward-looking statements in this prospectus include, among other things, statements about:

    our estimates regarding our expenses, future revenues, anticipated capital requirements and our needs for additional financing;

    our ability to advance our product candidates into, and successfully complete, clinical trials and the anticipated timing of such clinical trials;

    the timing of and our ability to obtain and maintain marketing approvals for our product candidates and the anticipated regulatory pathways for our product candidates;

    the rate and degree of market acceptance and clinical utility of our product candidates;

    the size and potential growth of the markets for any of our product candidates and our ability to impact the size of those markets;

    our expectations regarding the potential safety, efficacy or clinical utility of our product candidates, particularly in comparison to our competitors' products and product candidates;

    our commercialization, marketing and manufacturing capabilities and strategy;

    the timing of the initiation, progress and results of preclinical studies and research and development programs;

    market and industry trends;

    our ability to leverage the experience of our management team;

    our expectations with respect to future growth and investments in our infrastructure, and our ability to effectively manage any such growth;

    our intellectual property position;

    our ability to identify additional products or product candidates, including from our COMTi platform, with significant commercial potential that are consistent with our commercial objectives; and

    our anticipated use of the net proceeds from this offering.

        We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements. We operate in a very competitive and rapidly changing environment. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make, and accordingly you should not place undue reliance on our forward-looking statements. We have included important factors in the cautionary statements included in this prospectus, particularly in

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the "Risk Factors" section, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

        You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement of which this prospectus is a part completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of the forward-looking statements in this prospectus by these cautionary statements. Except as required by law, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

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USE OF PROCEEDS

        We estimate that the net proceeds from our issuance and sale of 4,230,769 units in this offering will be approximately $22.7 million, assuming an initial public offering price of $6.50 per unit, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters exercise their over-allotment option in full, we estimate that the net proceeds from this offering will be approximately $26.5 million, assuming an initial public offering price of $6.50 per unit, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

        A $1.00 increase or decrease in the assumed initial public offering price of $6.50 per unit would increase or decrease the net proceeds from this offering by approximately $3.9 million, assuming that the number of units offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

        Similarly, a one million unit increase or decrease in the number of units offered by us would increase or decrease the net proceeds to us by $5.9 million, assuming the initial public offering price of $6.50 per unit, which is the midpoint of the price range set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

        The principal purposes of this offering are to obtain additional capital to support our operations, to create a public market for our common stock and to facilitate our future access to the public equity markets. As of June 30, 2015, we had cash and cash equivalents of $6.1 million. We plan to use the net proceeds from this offering, together with our existing cash and cash equivalents, as follows:

    approximately $9.0 million to fund the costs of our Phase 2 clinical development of CERC-301;

    approximately $7.0 million to fund the costs of our Phase 2 clinical development of CERC-501;

    approximately $1.5 million to fund research and development, and to advance our pipeline of preclinical lead candidates, under the COMTi platform, including the selection of additional candidates and preclinical research for CERC-406; and

    the remainder for working capital, general corporate purposes and potential in-licensing or other acquisitions.

        This expected use of net proceeds from this offering represents our intentions based upon our current plans and business conditions, which could change in the future as our plans and business conditions evolve. The amounts and timing of our actual expenditures may vary significantly depending on numerous factors, including the progress of our development, the status of and results from clinical trials for CERC-301 and CERC-501, as well as any collaborations that we may enter into with third parties for our product candidates, and any unforeseen cash needs. As a result, our management will retain broad discretion over the allocation of the net proceeds from this offering. We have no current understandings, agreements, commitments or obligations to in-license, acquire or invest in complementary businesses, technologies, products or assets.

        Based on our planned use of the net proceeds from this offering and our existing cash and cash equivalents described above, we estimate that such funds will be sufficient to enable us to complete Phase 2 clinical development of CERC-301 and CERC-501, preclinical research for CERC-406, and identify other preclinical lead candidates from our COMTi platform. It is possible that we will not achieve the progress that we expect with respect to CERC-301 and our COMTi platform because the actual costs and timing of development and marketing approval are difficult to predict and are subject to substantial risks and delays.

        Pending our use of the net proceeds from this offering, we intend to invest the net proceeds in a variety of capital preservation investments, including short-term, investment-grade, interest-bearing instruments and United States government securities.

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DIVIDEND POLICY

        We have never declared or paid cash dividends on our capital stock. We intend to retain all of our available funds and future earnings, if any, to finance the growth and development of our business. We do not intend to pay cash dividends to our stockholders in the foreseeable future. Any future determination related to our dividend policy will be made at the discretion of our board of directors and will depend upon, among other factors, our results of operations, financial condition, capital requirements, contractual restrictions, business prospects and other factors our board of directors may deem relevant.

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CAPITALIZATION

        The following table sets forth our cash and cash equivalents and capitalization as of June 30, 2015:

    on an actual basis;

    on a pro forma basis to give effect to (i) the automatic conversion of all outstanding shares of our convertible preferred stock into an aggregate of 3,980,422 shares of our common stock upon the closing of this offering and (ii) the reclassification of approximately $1.5 million related to the investor rights obligation and warrant liability from liabilities to permanent equity upon the closing of this offering; and

    on a pro forma as adjusted basis to give further effect to our issuance and sale of 4,230,769 units in this offering at an assumed initial public offering price of $6.50 per unit, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Additionally, the pro forma as adjusted basis assumes the Warrants sold in this offering will be accounted for as equity instruments.

        The information in this table is illustrative only and our capitalization following the closing of this offering will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing. You should read this table in conjunction with the information contained in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of this prospectus and with our financial statements and the notes thereto included elsewhere in this prospectus.

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  As of June 30, 2015  
 
  Actual   Pro forma   Pro forma as
adjusted
 
 
  (in thousands)
 

Cash and cash equivalents

  $ 6,143   $ 6,143   $ 28,854  

Liabilities:

                   

Term debt (net of debt discount)

  $ 7,053   $ 7,053   $ 7,053  

Convertible Preferred Stock:

   
 
   
 
   
 
 

Series A convertible preferred stock, $0.001 par value; 31,116,391 shares authorized, 31,116,391 shares issued and outstanding, actual; no shares designated, issued or outstanding, pro forma and pro forma as adjusted

    10,463          

Series A-1 convertible preferred stock, $0.001 par value; 9,074,511 shares authorized, 9,074,511 shares issued and outstanding, actual; no shares designated, issued or outstanding, pro forma and pro forma as adjusted

    3,389          

Series B convertible preferred stock, $0.001 par value; 115,000,000 shares authorized, 58,948,735 shares issued and outstanding, actual; no shares designated, issued or outstanding, pro forma and pro forma as adjusted

    14,493          

Total convertible preferred stock

    28,345          

Stockholders' (deficit) equity:

                   

Common stock, $0.001 par value; 230,000,000 shares authorized and 649,721 shares issued and outstanding, actual; 230,000,000 shares authorized and 4,630,143 shares issued and outstanding, pro forma; 200,000,000 shares authorized and 8,860,912 shares issued and outstanding, pro forma as adjusted

    1     5     9  

Preferred stock, par value $0.001; no shares authorized, issued and outstanding, actual and pro forma; 5,000,000 shares authorized, no shares issued and outstanding, pro forma as adjusted

             

Additional paid in capital

    17,034     46,895     69,602  

Accumulated deficit

    (49,224 )   (49,224 )   (49,224 )

Total stockholders' (deficit) equity

    (32,189 )   (2,324 )   20,387  

Total capitalization

  $ 3,209   $ 4,729   $ 27,440  

        A $1.00 increase or decrease in the assumed initial public offering price of $6.50 per unit would increase (decrease) each of the pro forma as adjusted cash and cash equivalents, additional paid-in capital, total stockholders' (deficit) equity and total capitalization by approximately $3.9 million, assuming that the number of units offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of units we are offering. Each increase (decrease) of 1.0 million units offered by us would increase (decrease) each of cash and cash equivalents, additional paid-in capital, total stockholders' (deficit) equity and total capitalization by approximately $5.9 million, assuming that the assumed initial public offering price, which is the midpoint of the price range set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

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        The table above does not include:

    510,884 shares of our common stock issuable upon the exercise of stock options outstanding as of June 30, 2015 at a weighted-average exercise price of $8.88 per share;

    490,756 shares of our common stock issuable upon the exercise of warrants outstanding as of June 30, 2015 at a weighted-average exercise price of $26.32 per share, which warrants are expected to remain outstanding upon the closing of this offering;

    166,718 shares of our common stock issuable upon the exercise of warrants outstanding as of June 30, 2015 at a weighted-average exercise price of $8.40 per share, which warrants will expire upon the closing of this offering in accordance with their terms, unless exercised prior thereto;

    22,328 shares of our common stock issuable upon the exercise of a warrant outstanding as of June 30, 2015 at an exercise price of $8.40 per share, which warrant is exercisable to purchase Series B convertible preferred stock prior to the completion of this offering and which warrant is expected to remain outstanding upon the closing of this offering;

    the 4,230,769 shares of our common stock issuable upon exercise of the Class A Warrants sold in this offering;

    the 2,115,384 shares of our common stock issuable upon exercise of the Class B Warrants sold in this offering;

    105,767 shares of our common stock issuable upon the exercise of the unit purchase options issued in connection with this offering to the underwriters, assuming a total of 4,230,769 units are sold in this offering and the exercise of the underwriters' class A warrants and the underwriters' class B warrants issued as a components of the unit purchase options at an exercise price of $5.23 and $4.49 per full share, respectively, assuming an initial public offering price of $6.50 per unit, which is the midpoint of the price range set forth on the cover page of this prospectus;

    254,236 shares of our common stock available for future issuance under our 2011 Stock Incentive Plan as of June 30, 2015, which upon effectiveness of our 2015 Omnibus Incentive Compensation Plan will be available for issuance under our 2015 Omnibus Incentive Compensation Plan; and

    890,815 shares of our common stock available for future issuance under our 2015 Omnibus Incentive Compensation Plan, which will become effective on the business day immediately preceding the date on which the registration statement is declared effective.

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DILUTION

        If you invest in the units sold in this offering, your ownership interest will be diluted immediately to the extent of the difference between the initial public offering price per unit and the pro forma net tangible book value per share of our common stock after this offering. Net tangible book value per share of our common stock is determined at any date by subtracting our total liabilities from the amount of our total tangible assets (total assets less intangible assets) and dividing the difference by the number of shares of our common stock deemed outstanding at that date.

        The historical net tangible book value of our common stock as of June 30, 2015 was $(3.8) million, or $(5.92) per share of our common stock, based on 649,721 shares of our common stock outstanding as of June 30, 2015.

        The pro forma net tangible book value of our common stock as of June 30, 2015 was $(2.3) million, or $(0.50) per share of our common stock, and represents our historical net tangible book deficit as of June 30, 2015 after giving effect to the conversion of all of our outstanding convertible preferred stock into an aggregate of 3,980,422 shares of our common stock.

        After giving further effect to the sale of 4,230,769 units by us in this offering at an assumed initial public offering price of $6.50 per unit, which is the midpoint of the price range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of June 30, 2015 would have been $20.4 million, or $2.30 per share. This represents an immediate increase in pro forma as adjusted net tangible book value of $2.80 per share to existing stockholders, and an immediate dilution of $4.20 per share to investors participating in this offering. The table below illustrates this per share dilution.

Assumed initial public offering price per unit

                   $ 6.50  

Historical net tangible book value per share as of June 30, 2015

    (5.92 )                 

Pro forma increase in net tangible book value (deficit) per share attributable the conversion of outstanding convertible preferred stock

    5.42                   

Pro forma net tangible book value (deficit) per share before this offering

    (0.50 )      

Pro forma increase in net tangible book value (deficit) per share attributable to new investors purchasing units in this offering

    2.80        

Pro forma as adjusted net tangible book value (deficit) per share after this offering

    2.30        

Dilution per share to new investors purchasing units in this offering

        $ 4.20  

        A $1.00 increase or decrease in the assumed initial public offering price of $6.50 per unit, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) our pro forma as adjusted net tangible book value by $3.9 million or by $0.43 per share and the dilution to new investors in this offering by $3.76 per share, assuming that the number of units offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

        We may also increase or decrease the number of units we are offering. An increase of 1.0 million units offered by us would increase our pro forma as adjusted net tangible book value (deficit) as of June 30, 2015, by approximately $5.9 million or by $0.37 per share and the dilution per share to new investors purchasing units in this offering by $3.83, assuming the number of units offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. Conversely, a

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decrease of 1.0 million units offered by us would decrease our pro forma as adjusted net tangible book value (deficit) as of June 30, 2015, by approximately $5.9 million or by $0.46 per share and the dilution per share to new investors purchasing units in this offering by $4.66, assuming the number of units offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

        If the underwriters exercise their over-allotment option in full, the pro forma as adjusted net tangible book value (deficit) per share after giving effect to this offering would be $2.54 per share, which amount represents an immediate increase in pro forma net tangible book value (deficit) of $0.24 per share of our common stock to existing stockholders and an immediate dilution in net tangible book value (deficit) of $3.96 per share of our common stock to new investors purchasing units in this offering.

        The following table summarizes, as of June 30, 2015, on a pro forma basis after giving effect to the conversion of outstanding convertible preferred stock, the differences between the number of units purchased from us, the total consideration paid to us, and the average price per share or unit paid to us by existing stockholders and by new investors purchasing units in this offering at an assumed initial public offering price of $6.50 per unit, which is the midpoint of the price range set forth on the cover page of this prospectus, before deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 
  Shares/Units Purchased   Total Consideration   Average Price  
 
  Number   Percentage   Amount   Percentage   Per Share/Unit  

Existing shareholders

    4,630,143     52 % $ 51,100,000     65 % $ 11.04  

New investors

    4,230,769     48 %   27,499,999     35 %   6.50  

Total

    8,860,912     100 % $ 78,599,999     100 % $ 8.87  

        The number of shares of our common stock outstanding immediately following this offering is based on 649,721 shares of our common stock outstanding as of June 30, 2015 and giving effect to the pro forma conversion of our convertible preferred stock into an aggregate of 3,980,422 shares of our common stock upon the closing of this offering. This number excludes:

    510,884 shares of our common stock issuable upon the exercise of stock options outstanding as of June 30, 2015 at a weighted-average exercise price of $8.88 per share;

    490,756 shares of our common stock issuable upon the exercise of warrants outstanding as of June 30, 2015 at a weighted-average exercise price of $26.32 per share, which warrants are expected to remain outstanding upon the closing of this offering;

    166,718 shares of our common stock issuable upon the exercise of warrants outstanding as of June 30, 2015 at a weighted-average exercise price of $8.40 per share, which warrants will expire upon the closing of this offering in accordance with their terms, unless exercised prior thereto;

    22,328 shares of common stock issuable upon the exercise of a warrant outstanding as of June 30, 2015 at an exercise price of $8.40 per share, which warrant is exercisable to purchase Series B convertible preferred stock prior to the completion of this offering and which warrant is expected to remain outstanding upon the closing of this offering;

    the 4,230,769 shares of our common stock issuable upon exercise of the Class A Warrants sold in this offering;

    the 2,115,384 shares of our common stock issuable upon exercise of the Class B Warrants sold in this offering;

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    105,767 shares of our common stock issuable upon the exercise of the unit purchase options issued in connection with this offering to the underwriters, assuming a total of 4,230,769 units are sold in this offering and the exercise of the underwriters' class A warrants and the underwriters' class B warrants issued as a components of the unit purchase options at an exercise price of $5.23 and $4.49 per full share, respectively, assuming an initial public offering price of $6.50 per unit, which is the midpoint of the price range set forth on the cover page of this prospectus;

    254,236 shares of our common stock available for future issuance under our 2011 Stock Incentive Plan as of June 30, 2015, which upon effectiveness of our 2015 Omnibus Incentive Compensation Plan will be available for issuance under our 2015 Omnibus Incentive Compensation Plan; and

    890,815 shares of our common stock available for future issuance under our 2015 Omnibus Incentive Compensation Plan, which will become effective business day immediately preceding the date on which the registration statement is declared effective.

        To the extent that outstanding stock options are subsequently exercised, there will be further dilution to new investors. If all outstanding options as of June 30, 2015 had been exercised, assuming the treasury stock method, the pro forma net tangible book value per share as of June 30, 2015 (calculated on the basis of the assumptions set forth above) would have been approximately $(2.3) million, or $(0.49) per share of our common stock, and the pro forma as adjusted net tangible book value would have been $2.26 per share, representing dilution in our pro forma adjusted net tangible book value per share to new investors of $0.04.

        In addition, we may choose to raise additional capital due to market conditions or strategic considerations, even if we believe we have sufficient funds for our current or future operating plans. To the extent that we raise additional capital by issuing equity securities or convertible debt, your ownership will be further diluted.

        Effective upon the closing of this offering, an aggregate of 1,145,051 shares of our common stock will be reserved for future issuance under our equity benefit plans, and the number of reserved shares will also be subject to automatic annual increases in accordance with the terms of the plans. New options that we may grant under our equity benefit plans will further dilute investors purchasing common stock in this offering.

        If the underwriters exercise their over-allotment option in full, the following will occur:

    the percentage of shares of our common stock held by existing stockholders will decrease to approximately 49% of the total number of shares of our common stock outstanding after this offering; and

    the number of shares of our common stock held by new investors will increase to approximately 51% of the total number of shares of our common stock outstanding after this offering.

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SELECTED FINANCIAL DATA

        The following tables set forth our summary financial data for the periods indicated. The following summary financial data as of and for the years ended December 31, 2013 and 2014 are derived from our audited financial statements appearing elsewhere in this prospectus. The following summary financial data for the six-month periods ended June 30, 2014 and 2015, and the selected balance sheet data as of June 30, 2015, are derived from our unaudited financial statements appearing elsewhere in this prospectus.

        This summary financial data should be read together with the historical financial statements and related notes to those statements, as well as "Management's Discussion and Analysis of Financial Condition and Results of Operations," which are included elsewhere in this prospectus. See note 3 to our audited financial statements appearing elsewhere in this prospectus for information regarding computation of basic and diluted net loss per share of common stock, unaudited pro forma basic and diluted net loss per share of common stock and the unaudited pro forma weighted average basic and diluted common shares outstanding used in computing pro forma basic and diluted net loss per common share.

 
  Years Ended December 31,   Six Months Ended June 30,  
 
  2013   2014   2014   2015  

Operating expenses:

                         

Research and development

  $ 8,914,084   $ 12,240,535   $ 5,610,764   $ 3,598,606  

General and administrative

    4,020,364     4,875,030     1,673,573     1,776,817  

Total operating expenses

    12,934,448     17,115,565     7,284,337     5,375,423  

Loss from operations

   
(12,934,448

)
 
(17,115,565

)
 
(7,284,337

)
 
(5,375,423

)

Other income (expense):

                         

Change in fair value of warrant liabilities and investor rights obligation              

    (121,115 )   2,266,161     385,990     (337,739 )

Interest income (expense), net

    10,555     (1,206,187 )   (794,038 )   (437,302 )

Total other income (expense):

    (110,560 )   1,059,974     (408,048 )   (775,041 )

Net loss

 
$

(13,045,008

)

$

(16,055,591

)

$

(7,692,385

)

$

(6,150,464

)

Net loss attributable to common stockholders

  $ (13,126,972 ) $ (3,521,153 ) $ (7,692,385 ) $ (6,150,464 )

Net loss per share of common stock, basic and diluted

  $ (20.72 ) $ (5.48 ) $ (12.10 ) $ (9.47 )

Weighted-average shares of common stock outstanding, basic and diluted

    633,669     642,052     635,714     649,721  

Pro forma net loss per share of common stock—basic and diluted (unaudited)

        $ (1.01 )       $ (1.33 )

Pro forma weighted-average shares of common stock outstanding, basic and diluted (unaudited)

          3,501,768           4,630,143  

 

 
  As of December 31,    
 
 
  As of June 30,
2015
 
 
  2013   2014  

Balance Sheet Data:

                   

Cash and cash equivalents

  $ 3,421,480   $ 11,742,349   $ 6,142,864  

Total assets

    5,075,600     12,316,894     7,582,120  

Long term debt, net of current portion and discount

        5,308,211     4,009,435  

Total liabilities

    3,065,642     10,302,027     11,425,504  

Convertible preferred stock

    19,856,633     28,345,531     28,345,531  

Total stockholders' deficit

    (17,846,675 )   (26,330,664 )   (32,188,915 )

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

        You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes appearing at the end of this prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business and related financing, includes forward looking statements that involve risks, uncertainties and assumptions. As a result of many factors, including those factors set forth in the "Risk Factors" section of this prospectus, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in this prospectus.

Overview

        We are a clinical stage biopharmaceutical company with the goal of becoming a leader in the development of innovative drugs that make a difference in the lives of patients with neurological and psychiatric disorders. We have a portfolio of clinical and preclinical compounds that we believe are best in class and where human proof of concept has been established for the compound or the target. We are currently pursuing regulatory approval of three product candidates: CERC-301, CERC-501 and CERC-406.

        CERC-301 is currently in Phase 2 development as an oral, adjunctive treatment of patients with major depressive disorder, or MDD, who are failing to achieve an adequate response to their current antidepressant treatment and are severely depressed. We received fast track designation by the United States Food and Drug Administration, or FDA, in November 2013 for CERC-301 for the treatment of MDD. CERC-301 belongs to a class of compounds known as antagonists, or inhibitors, of the N-methyl-D-aspartate, or NMDA, receptor, a receptor subtype of the glutamate neurotransmitter system that is responsible for controlling neurological adaptation. We believe CERC-301 will be a first-in-class medication that will cause a significant reduction in depression symptoms in a matter of days, as compared to weeks or months with conventional therapies, because it selectively blocks the NMDA receptor subunit 2B, or NR2B, which we believe provides rapid and significant antidepressant activity without the adverse side effect profile of non selective NMDA receptor antagonists. We are also currently developing CERC-501, which is in Phase 2 development. We intend to first develop CERC-501 for treatment of substance use disorders (e.g. nicotine, alcohol, and/or cocaine) and adjunctive treatment of MDD. If we receive approval for CERC-501 for treatment of substance use disorders and for adjunctive treatment of MDD, we plan to further develop CERC-501 for the concurrent treatment of MDD and substance use disorders, or co-occurring disorders. CERC-501 was acquired in February 2015, and is a potent and selective kappa opioid receptor, or KOR, antagonist. KORs are believed to play key roles in modulating stress, mood and addictive behaviors, which form the basis of co-occurring disorders. We are preparing to initiate a clinical study to evaluate the effect of CERC-501 on aspects of tobacco withdrawal and reinstatement in the first half of 2016. In addition we are considering conducting a Phase 2 clinical study in inadequately treated subjects with major depressive disorder currently on antidepressants, with an initiation date in the second half of 2016, with the intent of thereafter pursuing additional studies focused on the treatment of major depressive disorder, substance use disorders, and, depending on market approval, the treatment of co-occurring disorders. CERC-406 is our preclinical lead candidate from our proprietary platform of compounds that inhibit catechol-O-methyltransferase, or COMT, within the brain, which we refer to as our COMTi platform. We anticipate developing CERC-406 for the treatment of residual cognitive impairment symptoms in patients with MDD.

        We incorporated in January 2011 and commenced operations in the second quarter of 2011. Since inception, our operations have included organizing and staffing our company, business planning, raising capital and developing our product candidates, CERC-301, CERC-501 and FP01, which we have

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discontinued developing, and the COMTi platform, including our initial product candidate CERC-406. We have no products approved for commercial sale and have not generated any revenue from product sales to date, and we continue to incur significant research, development and other expenses related to our ongoing operations. We have incurred losses in each period since our inception. We have financed our operations primarily through private placements of our common and convertible preferred stock and convertible debt. As of June 30, 2015, we had an accumulated deficit of $49.2 million. Our net loss was $13.0 and $16.1 million for the year ended December 31, 2013 and 2014, respectively, and $6.2 million for the six months ended June 30, 2015. Our ability to become and remain profitable depends on our ability to generate revenue. We do not expect to generate any product revenue unless, and until, we obtain marketing approval for, and commercialize, any of our product candidates.

        We have received aggregate net proceeds of $51.1 million through June 30, 2015 from the sale of our common and convertible preferred stock and convertible debt. In addition, we received $292,000 pursuant to a grant agreement with the National Heart, Lung, and Blood Institute of the National Institute of Health, or NIH. From inception through June 30, 2015, we had incurred approximately $36.0 million of total research and development expenses and approximately $13.6 million of total general and administrative expenses.

        We expect to incur significant expenses and operating losses for the foreseeable future as we continue the development and clinical trials of, and seek marketing approval for, our product candidates. If we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, distribution and outsourced manufacturing, unless we offset our commercialization expenses by entering into a favorable partnering arrangement with a third party. Furthermore, upon the closing of this offering, we expect to incur additional costs associated with operating as a public company, including significant legal, accounting, investor relations and other expenses that we did not incur as a private company. Our ability to achieve profitability is dependent on our ability, alone or with others, to (i) complete the development of our product candidates successfully, (ii) obtain required marketing approvals, (iii) manufacture and market our potential products successfully or have such products manufactured and marketed by others, and (iv) gain market acceptance for such products. There can be no assurance as to whether or when we will achieve profitability.

        We will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate our research and development programs or any future commercialization efforts. We will seek to fund our operations through the sale of equity, debt financings or other sources, including potential collaborations. However, we may be unable to raise additional funds or enter into such other agreements when needed on favorable terms, or at all. If we fail to raise capital or enter into such other arrangements as, and when, needed, we may have to significantly delay, scale back or discontinue the development and/or commercialization of one or more of our product candidates.

        Our recurring losses and negative cash flows from operations raise substantial doubt about our ability to continue as a going concern. As a result, our independent registered public accounting firm included an explanatory paragraph regarding this uncertainty in its report on our financial statements as of and for the year ended December 31, 2014. We have no current source of revenues to sustain our present activities, and we do not expect to generate revenues until, and unless, the FDA or other regulatory agencies approve our product candidates and we successfully commercialize any such product candidates. Accordingly, our ability to continue as a going concern will require us to obtain additional financing to fund our operations.

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Components of Operating Results

Revenue

        To date, we have derived all of our revenue from a research grant from NIH, which we received in 2011. We do not expect any grant revenue during 2015 and, although we plan to submit grant applications from time to time, no assurances can be made that the grant will be awarded.

        We have not generated any revenue from commercial product sales. In the future, if any of our product candidates currently under development are approved for commercial sale, we may generate revenue from product sales, or alternatively, we may choose to select a collaborator to commercialize our product candidates in all or selected markets, thereby reducing revenue from product sales or increasing fees paid to collaborators. We will not generate any commercial revenue, if ever, until one of our product candidates receives marketing approval and we successfully commercialize such product candidates.

Research and Development Expenses

        Our research and development expenses consist primarily of costs incurred developing, testing and seeking marketing approval for our product candidates. These costs include both external costs, which are study-specific costs, and internal research and development costs, which are not directly allocated to our product candidates.

        External costs include:

    expenses incurred under agreements with third-party contract research organizations, or CROs, and investigative sites that conduct our clinical trials, preclinical studies and regulatory activities;

    payments made to contract manufacturers for drug substance and acquiring, developing and manufacturing clinical trial materials; and

    payments related to acquisitions of our product candidates and preclinical platform and milestone payments.

        Internal costs include:

    personnel-related expenses, including salaries, benefits and stock-based compensation expense;

    consulting costs related to our internal research and development programs;

    allocated facilities, depreciation and other expenses, which include rent and utilities, as well as other supplies; and

    product liability insurance.

        Research and development costs are expensed as incurred. We record costs for some development activities, such as clinical trials, based on an evaluation of the progress to completion of specific tasks using data such as subject enrollment, clinical site activations or information provided to us by our vendors.

        We track external costs by discovery program and subsequently by product candidate once a product candidate has been selected for development. We have incurred a total of $36.0 million in research and development expenses from inception through June 30, 2015, with $13.0 million being spent on external costs primarily for CERC-301, $1.1 million spent on CERC-501, $11.2 million for our discontinued product candidate FP01, and $1.3 million spent on our COMTi platform and other preclinical programs; the remaining $9.5 million was spent primarily on internal costs, which are predominantly personnel-related costs, including stock-based compensation, and consulting and other costs. Product candidates in later stage clinical development generally have higher research and

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development expenses than those in earlier stages of development, primarily due to the increased size and duration of the clinical trials. As we advance our product candidates through clinical development, we expect that the amount of our research and development spending allocated to external spending relative to internal spending will continue to grow for the foreseeable future, while our internal research and development spending should grow at a slower and more controlled pace.

        During December 2014 and the first quarter of 2015, our research and development headcount was reduced by seven employees due to voluntary terminations. We expect to hire and to use consultants on an as needed basis to perform the work needed as we commence additional trials for CERC-301 and our first trial for CERC-501 during the second and third quarters of 2015. However, we anticipate that our research and development expenses for 2015 will be less than 2014. We anticipate that our research and development costs will increase in 2016 and beyond, with continued research, development and potential commercialization of our product candidates.

        It is difficult to determine with certainty the duration and completion costs of our current or future preclinical programs and clinical trials of our product candidates, whether the trial results will be positive, or if, when and to what extent we will generate revenue from the commercialization and sale of any of our product candidates that obtain marketing approval. We may never succeed in achieving marketing approval for any of our product candidates. The duration, costs and timing of clinical trials and development of our product candidates will depend on a variety of factors, including the uncertainties of future clinical and preclinical studies, uncertainties in clinical trial enrollment rate, the number of clinical sites included in trials, and the need to add more sites, and significant and changing government regulation. In addition, the probability of success for each product candidate will depend on numerous factors, including competition, manufacturing capability, market acceptance and commercial viability. We will determine which programs to pursue and how much to fund each program in response to the scientific and clinical success of each product candidate, as well as an assessment of each product candidate's commercial potential. A change in the outcome of any of the variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, based on the results of our Phase 2 clinical trials of FP01, expected future development expenses and the addressable market, we have decided to discontinue the development and commercialization of FP01. Additionally, if the FDA or other regulatory authorities were to require us to conduct clinical trials beyond those which we anticipate, or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development.

General and Administrative Expenses

        General and administrative expenses consist principally of professional fees, patent costs and salaries, benefits and related costs for executive and other personnel, including stock-based compensation and travel expenses. Other general and administrative expenses include facility-related costs, communication expenses and professional fees for legal, including patent-related expenses, consulting, tax and accounting services, insurance, depreciation and general corporate expenses.

        We anticipate that our general and administrative expenses will increase in the future with continued research, development and potential commercialization of our existing and future product candidates and expanded compliance obligations of operating as a public company. These increases will likely include greater costs for insurance, costs related to the hiring of additional personnel, payments to outside consultants and investor relations providers, and costs for legal and accounting professionals, among other expenses. Additionally, if and when we believe a marketing approval of a product candidate appears likely, we anticipate an increase in payroll and expense as a result of our preparation for commercial operations, especially as it relates to the sales and marketing of our product candidates.

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Change in Fair Value of Warrant Liabilities and Investor Rights Obligation

        We have issued warrants for the purchase of our Series B preferred stock and accounted for the obligation to issue additional shares of our Series B preferred as a freestanding financial instrument, which we refer to as the Investor Rights Obligation. The warrants and Investor Rights Obligation are classified as liabilities at their respective fair values. These liabilities are remeasured at each balance sheet date and changes in fair value are recorded within our statement of operations. We will remeasure the warrant liability immediately prior to the closing of this offering and, upon the conversion of such warrant into a warrant to purchase shares of our common stock upon the completion of this offering, we will reclassify these liabilities to permanent equity. The Investor Rights Obligation will expire upon the closing of this offering in accordance with its terms, unless exercised prior thereto.

Interest Income (Expense), net

        Interest income (expense), is primarily related to the amortization of the debt discounts and premiums and deferred financing fees in connection with the entry into our term debt facility in August 2014. We also made interest payments pursuant to the terms of such term debt facility.

        Interest income consists principally of interest earned on our cash and cash equivalent balances.

Critical Accounting Policies and Significant Judgments and Estimates

        This discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America, or GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported period. In accordance with GAAP, we base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. On an ongoing basis, we evaluate our estimates and assumptions, including those related to clinical and preclinical trial expenses and stock-based compensation. Actual results may differ from these estimates under different assumptions or conditions.

        While our significant accounting policies are more fully described in Note 2 to our audited financial statements appearing at the end of this prospectus, we believe the following accounting policies are critical to the portrayal of our financial condition and results. We have reviewed these critical accounting policies and estimates with the audit committee of our board of directors.

Research and Development Expenses

        Research and development costs are expensed as incurred. We rely heavily on third parties to conduct preclinical and clinical trials, as well as for the manufacture of our clinical trial supplies. Costs for certain development activities, such as clinical trials, are recognized based on an evaluation of the progress to completion of specific tasks using data such as subject enrollment, clinical site activations or information provided to us by our vendors with respect to their actual costs incurred. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected in the financial statements as prepaid or accrued research and development expense, as the case may be.

Income Taxes

        As of December 31, 2014, we had $40.9 million of Federal and Maryland net operating loss, or NOL, carryforwards that will begin to expire in 2031. As of December 31, 2014, we had $1.1 million

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and $0.5 million of Maryland and federal research and development credits, respectively, that will begin to expire in 2018. The NOL and research and development credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. NOL and tax credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders over a three- year period in excess of 50%, as defined under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, as well as similar state tax provisions. This could limit the amount of NOLs that we can utilize annually to offset future taxable income or tax liabilities. The amount of the annual limitation, if any, will be determined based on the value of the company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. All of our tax years are currently open to examination by each tax jurisdiction in which we are subject to taxation.

Convertible Preferred Stock

        We account for conversion options embedded in our convertible preferred stock in accordance with ASC 480, "Distinguishing Liabilities from Equity", ASC 815, "Derivatives and Hedging", and ASU 2014-16, an update to ASC 815. GAAP potentially requires companies to bifurcate conversion options from their host instruments and account for them as freestanding derivative financial instruments at their fair value according to certain criteria. The criteria includes circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable GAAP with changes in fair value reported in earnings as they occur, and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. We evaluated the Series A, A-1 and B convertible preferred stock and their embedded conversion features on the date of issuance and determined the host instruments and the embedded conversion features are more akin to equity and are therefore clearly and closely related as defined by ASC 815. As such, bifurcation of the embedded conversion feature was not required.

Estimated Fair Value of Investor Rights Obligation

        On July 11, 2014 and August 19, 2014, we issued Series B convertible preferred stock for aggregate proceeds of $15 million. In addition, we issued Series B convertible preferred stock upon conversion of our demand notes that had a an aggregate principal balance of $1 million at the time of conversion, as well as the conversion of our convertible promissory notes that had an aggregate principal balance of $1,250,000 and accrued interest of $9,016. At any time after the initial offering and prior to the earlier of (i) an initial public offering, or IPO, (ii) a deemed liquidation event, or (iii) June 30, 2017, the majority holders of the Series B convertible preferred stock issued may purchase up to an additional 53,351,117 shares of Series B convertible preferred stock under the same terms and conditions of the initial offering.

        We have determined that our obligation to issue, and our investor's obligation to purchase, additional shares of convertible preferred stock represented a freestanding financial instrument, which we accounted for as a liability. The freestanding financial instrument liability was initially recorded at fair value, with fair value changes recognized at each balance sheet date as increases or decreases to other income (expense), net in the statement of operations. At the time of the exercise of the option which, pursuant to its terms, must occur prior to an IPO, we will remeasure the obligation to fair value with the change recognized in other income (expense), net, in the statements of operations and immediately reclassify the liability to temporary equity.

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Estimated Fair Value of Convertible Preferred Stock Warrants

        Warrants for shares that are contingently redeemable, such as our Series B convertible preferred stock, are accounted for as freestanding financial instruments. These warrants are classified as liabilities on our consolidated balance sheets and are recorded at their estimated fair value. At the end of each reporting period, changes in the estimated fair value during the period are recorded as a component of other income (expense), net. We will continue to adjust these liabilities for changes in fair value until the earlier of the expiration or the exercise of the warrants.

Stock-Based Compensation

        We measure stock-based awards granted to our employees and nonemployee directors at fair value on the date of grant and recognize the corresponding compensation expense of those awards, net of estimated forfeitures, over the requisite service period, which is generally the vesting period of the respective award. Generally, we issue stock options and restricted stock with only service-based vesting conditions and record the expense for these awards using the straight-line method. We have historically granted stock options with exercise prices no less than the fair market value of our common stock as of the date of grant.

        We measure stock-based awards granted to nonemployee consultants at the fair value of the award on the date at which the related service is complete. Compensation expense is recognized over the period during which services are rendered by such nonemployee consultants until completed. At the end of each financial reporting period prior to the completion of the service, the fair value of these awards is re-measured using, for options, the then-current fair market value of our common stock and updated assumptions in the Black-Scholes option-pricing model and using, for restricted stock, the then-current fair market value of our common stock.

        The fair value of each stock option grant is estimated using the Black-Scholes option-pricing model. We are a private company and lack company-specific historical and implied volatility information. Therefore, we estimate our expected volatility based on the historical volatility of our publicly traded peer companies and expect to continue to do so until such time as we have adequate historical data regarding the volatility of our traded stock price. The expected term of our options has been determined utilizing the "simplified" method for awards that qualify as "plain-vanilla" options, while the expected term of our options granted to consultants and nonemployees has been determined based on the contractual term of the options. The risk-free interest rate is determined by reference to the United States Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that we have never paid cash dividends and do not expect to pay any cash dividends in the foreseeable future.

        The assumptions we used to determine the fair value of stock options granted to employees and directors are as follows, presented on a weighted average basis:

 
  Year Ended December 31,
 
  2013   2014

Risk-free interest rate

  0.85 - 1.90%   0.85 - 1.97%

Expected term of options (in years)

  6.0   5.0 - 6.25

Expected volatility

  70.0%   70.0%

Dividend yield

  0.0%   0.0%

        These assumptions represented our best estimates, but the estimates involve inherent uncertainties and the application of our judgment. As a result, if factors change and we use significantly different assumptions or estimates when valuing our stock options, our stock-based compensation expense could be materially different. We recognize compensation expense for only the portion of awards that are

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expected to vest. In developing a forfeiture rate estimate for pre-vesting forfeitures, we have considered our historical experience of actual forfeitures. If our future actual forfeiture rate is materially different from our estimate, our stock-based compensation expense could be significantly different from what we have recorded in the current period.

        Stock-based compensation expense totaled $749,000 and $1.1 million for the years ended December 31, 2013 and 2014, respectively, and $481,000 and $292,000 for the six months ended June 30, 2014 and 2015, respectively. We record stock-based compensation expense as a component of research and development expenses or general and administrative expenses, depending on the function performed by the grantee. For the years ended December 31, 2013 and 2014, and the six months ended June 30, 2014 and 2015, we allocated stock-based compensation as follows:

 
  Year Ended
December 31,
  Six Months
Ended
June 30,
 
 
  2013   2014   2014   2015  
 
  (in thousands)
  (unaudited)
 

Research and development

  $ 166   $ 202   $ 78   $ 43  

General and administrative

    583     885     403     249  

Total

  $ 749   $ 1,087   $ 481   $ 292  

        As of June 30, 2015, we had $208,000 of total unrecognized stock-based compensation expense, which we expect to recognize over a weighted-average remaining vesting period of approximately 1.29 years. In future periods, our stock-based compensation expense is expected to increase as a result of recognizing our existing unrecognized stock-based compensation for awards that will vest and as we issue additional stock-based awards to attract and retain our employees.

Determination of the Fair Market Value of Common Stock

        We are a privately held company with no active public market for our common stock. Therefore, in the absence of a public trading market for our common stock, our board of directors has determined the fair market value of our common stock at various dates, with input from management, considering our most recently available third-party valuations of common stock and its assessment of additional objective and subjective factors that it believed were relevant and which may have changed from the date of the most recent valuation through the date of the grant. Once a public trading market for our common stock has been established in connection with the completion of this offering, it will no longer be necessary for our board of directors to determine the fair market value of our common stock in connection with our accounting for granted stock options and shares of restricted stock, as the fair market value of our common stock will be its trading price on The NASDAQ Capital Market.

        We have periodically determined the fair market value of our common stock at various dates using contemporaneous valuations performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants' Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. Our common stock valuations were performed using a hybrid method, which used market approaches to determine our enterprise value. The hybrid method is a probability-weighted expected return method where the equity value in one or more of the scenarios is calculated using an option-pricing method. We selected the method based on availability and the quality of information to develop the assumptions for the methodology. We performed these contemporaneous valuations, with the assistance of a third-party valuation specialist, as of July 11, 2014 and December 31, 2014. In addition, our board of directors considered various

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objective and subjective factors, along with input from management, to determine the fair market value of our common stock as of each grant date, including the following:

    prices at which we sold shares of our preferred stock and the superior rights and preferences of our preferred stock relative to our common stock;

    the progress of our research and development programs, including the status of non-clinical studies and clinical trials for our product candidates;

    our stage of development and commercialization and our business strategy;

    our financial condition, including cash on hand;

    our historical and forecasted performance and operating results;

    the composition of, and changes to, our management team and board of directors;

    the lack of an active public market for our common stock and our preferred stock;

    the likelihood of achieving a liquidity event, such as a sale of our company or an initial public offering, or IPO, given prevailing market conditions;

    the analysis of IPOs and the market performance of similar companies in the biopharmaceutical industry;

    external market conditions affecting the biopharmaceutical industry; and

    trends within the biopharmaceutical industry.

        The assumptions underlying these valuations represent management's determinations, which involve inherent uncertainties and the application of management judgment. As a result, if factors or expected outcomes change and we use significantly different assumptions or estimates, our equity-based compensation could be materially different.

        Following the closing of this offering, the fair market value of our common stock will be determined based on the quoted market price of our common stock.

        The following table summarizes by grant date the number of shares subject to options granted since January 1, 2014, the per share exercise price of the options, the fair market value of common stock underlying the options on date of grant and the per share fair value of the options:

Date of Issuance
  Number of Shares
Underlying Options
Granted
  Exercise Price
per Share
  Fair Market
Value per
Common Share
  Fair Value of
Options per
Share
 

5/13/2014

    44,640   $ 10.08   $ 5.32   $ 2.52  

7/10/2014

    78,491   $ 10.08   $ 5.32   $ 2.52 - 2.80  

7/10/2014

    54,353   $ 16.80   $ 5.32   $ 1.68  

4/30/2015

    3,571   $ 6.44   $ 5.04   $ 2.80  

6/2/2015

    69,285   $ 6.16   $ 5.04   $ 2.52 - 2.80  

        In valuing our common stock, the board of directors determined the equity value of our business by considering a number of valuation approaches and allocation methodologies. Valuation techniques considered included the Current Value Method, the Probability-Weighted Expected Return Method, or PWERM, the Option Pricing Method, or OPM, and the Hybrid Method. Given the range of possible financing and exit events that existed at the time we completed our valuations, we concluded the PWERM to be the most appropriate for purposes of valuing our common stock given our expected time to a liquidity event, subjectivity with regards to estimating possible proceeds from a future liquidation event and subjectivity with regards to the ability to estimate the probability of an IPO, sale or other financing events. The PWERM explicitly considers the various terms of our investor related

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documents, including various rights of each class of our stock, at the date of the liquidity event when those rights will either be executed or abandoned. Under the PWERM, the value of each class of our stock is estimated using a probability-weighted analysis of the present value of the returns afforded to our stockholders under each of our possible future exit scenarios. The scenarios included within the PWERM analysis included IPOs, a sale transaction, remaining private and dissolution.

        Discrete future outcomes considered under the PWERM included non-IPO market based outcomes as well as IPO scenarios. In the non-IPO scenarios, a large portion of the equity value is allocated to the preferred stock to incorporate higher aggregate liquidation preferences. In the IPO scenarios, the equity value is allocated pro rata among the shares of common stock and each series of preferred stock, which causes the common stock to have a higher relative value per share than under the non-IPO scenario. The fair value of the enterprise determined using the IPO and non-IPO scenarios will be weighted according to the board of directors' estimate of the probability of each scenario.

        Once our common stock commences trading it will not be necessary to determine the fair value of new stock-based awards pursuant to the methodology described above.

Recent Accounting Pronouncements

        In May 2014, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update No. 2014-09, Revenue From Contracts With Customers, or ASU 2014-09. Pursuant to this update, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in this update are currently effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, and are to be applied retrospectively, or on a modified retrospective basis. Early application is not permitted. In July 2015, the FASB approved a one year deferral of the effective date for annual reporting periods beginning after December 15, 2017 with early adoption permitted for annual periods beginning after December 15, 2016. We are currently evaluating the impact of adopting ASU 2014-09 on our financial statements.

        In June 2014, the FASB issued ASU No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation, or Topic 915. The guidance set forth in Topic 915 is intended to reduce the overall cost and complexity associated with financial reporting for development stage entities without reducing the availability of relevant information. The FASB also believes the changes will simplify the consolidation accounting guidance by removing the differential accounting requirements for development stage entities. As a result of these changes, there no longer will be any accounting or reporting differences in generally accepted accounting principles, or GAAP, between development stage entities and other operating entities. For organizations defined as public business entities, the presentation and disclosure requirements in Topic 915 will no longer be required starting with the first annual period beginning after December 15, 2014, including interim periods therein. Early application is permitted for any annual reporting period or interim period for which the entity's financial statements have not yet been issued (public business entities) or made available for issuance (other entities). We early adopted this guidance during the year ended December 31, 2014 and, as a result, we no longer present inception-to-date information about the statements of operations, cash flows, and stockholders' deficit.

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        In August 2014, FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern, or ASU 2014-15. ASU 2014-15 explicitly requires a company's management to assess an entity's ability to continue as a going concern, and to provide related footnote disclosures in certain circumstances. The new standard will be effective in the first annual period ending after December 15, 2016, although early application is permitted. We are currently evaluating the potential impact of the adoption of this standard, but believe its adoption will have no impact on our financial position, results of operations or cash flows.

        In November 2014, the FASB issued ASU No. 2014-16, Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share is more akin to Debt or to Equity, or ASU 2014-16. ASU 2014-16 clarifies how current GAAP should be interpreted in evaluating the economic characteristics and risks of a host contract in a hybrid financial instrument that is issued in the form of a share. Specifically, ASU 2014-16 provides that an entity should consider all relevant terms and features, including the embedded derivative feature being evaluated for bifurcation, in evaluating the nature of the host contract. ASU 2014-16 is effective for public companies for fiscal years and interim periods within those fiscal years beginning after December 15, 2015 with early adoption permitted. We adopted this guidance for the year ended December 31, 2014 and have properly applied it to hybrid financial instruments.

        In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs, or ASU 2015-03. ASU 2015-03 requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation of a debt discount. The standard also aligns the GAAP presentation with International Financial Reporting Standards and will remedy the long-standing conflict with the guidance in FASB Concepts Statement No. 6, Elements of Financial Statements, which indicates that debt issuance costs do not meet the definition of an asset, because they provide no future economic benefit. ASU No. 2015-03 is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted for financial statements that have not been previously issued. The new guidance will be applied on a retrospective basis. The adoption of this guidance during the six months ended June 30, 2015 did not have a material impact on our balance sheets.

JOBS Act

        The JOBS Act contains provisions that, among other things, reduce reporting requirements for an "emerging growth company." As an emerging growth company, we have elected to not take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards and, as a result, will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies.

Internal Control Over Financial Reporting

        Assessing our staffing and training procedures to improve our internal control over financial reporting is an ongoing process. We are not currently required to comply with Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, and are therefore not required to make an assessment of the effectiveness of our internal control over financial reporting. As a result, our management did not perform an evaluation of our internal control over financial reporting as of December 31, 2014. Further, our independent registered public accounting firm has not been engaged to express, nor have they expressed, an opinion on the effectiveness of our internal control over financial reporting.

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Results of Operations

Comparison of Six Months Ended June 30, 2015 and 2014

Research and development

        Research and development expenses decreased by $2.0 million, from $5.6 million for the six months ended June 30, 2014 to $3.6 million for the six months ended June 30, 2015. This decrease resulted from a $2.5 million decrease in external research and development costs due to preparations for two clinical trials in 2014, partially offset by a $1.0 million expense during the six months ended June 30, 2015 related to the licensing of CERC-501. There was also a decrease of $420,000 in the six months ended June 30, 2015 as compared to the same period in 2014 related to personnel compensation and benefits due to a reduction in headcount. We expect future research and development expenses to increase due to the continued development of CERC-301 and our COMTi platform, including CERC-406, as well as the commencement of the development of CERC-501.

        The following table summarizes our research and development expenses for the six months ended June 30, 2014 and 2015:

 
  Six Months
Ended June 30,
 
 
  2014   2015  
 
  (in thousands)
 

CERC-301

  $ 4,093   $ 1,552  

COMTi

    314     158  

CERC-501

        1,103  

Personnel-related costs

    1,091     671  

Other research and development

    113     115  

  $ 5,611   $ 3,599  

General and Administrative

        General and administrative expenses increased by $0.1 million for the six months ended June 30, 2015 compared to the same period in 2014. During the six months ended June 30, 2015 our consulting and professional fees were $177,000 higher than the six months ended June 30, 2014 due to higher costs for financial consultants primarily in conjunction with our proposed initial public offering, and recruiter fees. In addition, marketing and business development expense was $71,000 higher for the six months ended June 30, 2015 as compared to the same period in 2014.

Change in Fair Value of Warrants and Investor Rights Obligation

        We recognized a loss on the change in fair value of our warrants and Investor Rights Obligation of $0.3 million during the six months ended June 30, 2015 as compared to a gain of $0.4 million during the same period in 2014. The change during the six months ended June 30, 2015 in fair value of warrants and Investor Rights Obligation is primarily due to the issuance of warrants for shares of Series B convertible preferred stock and our Investor Rights Obligation during the third quarter of 2014 and their respective changes in fair value.

        The change during the six months ended June 30, 2014 in fair value was due to the gain recognized from marking the warrants for shares of Series A-1 convertible preferred stock to market.

Interest Expense, Net

        Interest expense decreased by $0.4 million for the six months ended June 30, 2015 compared to the same period in 2014. The decrease is primarily due to the amortization of debt discounts in

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connection with our financing activities in 2014. This was offset for interest paid under our secured term loan facility that was entered into in August 2014 during the six months ended June 30, 2015.

Comparison of Years Ended December 31, 2014 and 2013

Research and development

        Research and development expenses increased by $3.3 million, from $8.9 million for the year ended December 31, 2013 to $12.2 million for the year ended December 31, 2014. During 2013, we had a partial year of FP01 clinical trial costs and minimal costs in 2014 due to the completion of the FP01 clinical trials. In 2014, we continued the development of CERC-301 and our COMTi platform. In the aggregate, these external research and development costs increased by $3.4 million. There was also an increase of $456,000 related to compensation and benefits related to personnel and related costs in 2014 as compared to 2013. Other research and development costs decreased by $569,000 due primarily to the inclusion of costs in 2013 for a research project on a compound that was discontinued. We expect future research and development expenses to increase due to the continued development of CERC-301 and our COMTi platform, including CERC-406, as well as the commencement of the development of CERC-501.

        The following table summarizes our research and development expenses for the years ended December 31, 2013 and 2014:

 
  Year Ended
December 31,
 
 
  2013   2014  
 
  (in thousands)
 

FP01

  $ 2,990   $ 28  

CERC-301

    2,717     8,711  

COMTi

    353     761  

Stock-based compensation

    166     202  

Other personnel-related costs

    1,857     2,277  

Other research and development

    831     262  

  $ 8,914   $ 12,241  

General and Administrative

        General and administrative expenses increased by $0.9 million for the year ended December 31, 2014 compared to the same period in 2013. Compensation and benefits expenses in 2014 were $0.6 million higher than in 2013 primarily due to option awards that were fully vested at the time of the award. We also incurred $0.6 million in additional consulting and professional fees in connection with the initial submission of our registration statement. These increases were offset by a $0.3 million reduction in marketing and business development expenses in 2014.

Change in Fair Value of Warrants and Investor Rights Obligation

        We recognized a loss on the change in fair value of our warrants and Investor Rights Obligation of $0.1 million during the year ended December 31, 2013 compared to a gain of $2.3 million in 2014. The change in fair value of warrants and Investor Rights Obligation is primarily due to the issuance of warrants for shares of Series B convertible preferred stock and our Investor Rights Obligation in 2014 and their respective changes in fair value.

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Interest Expense, Net

        Interest expense increased by $1.2 million for the year ended December 31, 2014 compared to the same period in 2013. The increase is primarily due to the amortization of debt discounts, premiums, and deferred financing fees in connection with our financing activities in 2014 as well as the interest paid under our secured term loan facility that was entered into in August 2014.

Liquidity and Capital Resources

        We have devoted most of our cash resources to research and development and general and administrative activities. Since our inception, we have incurred net losses and negative cash flows from our operations. We expect to incur significant expenses and operating losses for the foreseeable future as we continue the development and clinical trials of, and seek marketing approval for, our product candidates. We incurred net losses of $6.2 million in the six months ended June 30, 2015 and $13.0 million and $16.1 million for the years ended December 31, 2013 and 2014, respectively. At June 30, 2015, we had an accumulated deficit of $49.2 million, a working capital deficit of $1.0 million and cash and cash equivalents of $6.1 million. To date, we have not generated any revenues from the sale of products and we do not anticipate generating any revenues from the sale of our product candidates for the foreseeable future. Historically, we have financed our operations principally through private placements of common and convertible preferred stock, convertible and nonconvertible debt. Through June 30, 2015 we have received aggregate net proceeds of $51.1 million primarily from the issuance of common and convertible preferred stock and debt. We anticipate funding our operations over the next several years from further sales of debt and equity securities, including this offering.

Cash Flows

        The following table summarizes our cash flows for the six months ended June 30, 2014 and 2015:

 
  Six Months
Ended June 30,
 
 
  2014   2015  
 
  (in thousands)
 

Net cash (used in) provided by:

             

Operating activities

  $ (4,451 ) $ (4,800 )

Investing activities

         

Financing activities

    1,250     (799 )

Net (decrease) in cash and cash equivalents

  $ (3,201 ) $ (5,599 )

Net cash used in operating activities

        Net cash used in operating activities was $4.5 million for the six months ended June 30, 2014 and consisted primarily of a net loss of $7.7 million offset by a non-cash increase of $481,000 of stock-based compensation and a $2.1 million increase in accounts payable and accrued expenses due primarily to increased clinical trial activities.

        Net cash used in operating activities was $4.8 million for the six months ended June 30, 2015 and consisted primarily of a net loss of $6.2 million and an increase in our net operating assets of $0.6 million primarily due to the timing of payments related to our personnel and clinical trial activities. The loss was also offset by $0.7 million in non-cash charges that are primarily related to non-cash interest and a $0.3 million non-cash loss on the change in fair value of our warrants and Investor Rights Obligation liabilities.

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Net cash provided by and (used in) financing activities

        Net cash provided by and used in financing activities was $1.25 million and ($0.8) million for the six months ended June 30, 2014 and June 30, 2015, respectively, and related to proceeds from the bridge note financing in 2014 and IPO-related deferred financing costs and payments on outstanding debt obligations in 2015.

        The following table summarizes our cash flows for the years ended December 31, 2013 and 2014:

 
  Year Ended
December 31,
 
 
  2013   2014  
 
  (in thousands)
 

Net cash (used in) provided by:

             

Operating activities

  $ (11,485 ) $ (15,518 )

Investing activities

    (29 )   (20 )

Financing activities

    5,416     23,859  

Net decrease (increase) in cash and cash equivalents

  $ (6,098 ) $ 8,321  

Net cash used in operating activities

        Net cash (used in) operating activities was $11.5 million for the year ended December 31, 2013 and consisted primarily of a net loss of $13.0 million offset by a non-cash increase of $749,000 of stock-based compensation and a $1.1 million increase in accounts payable and accrued expenses due primarily to increased clinical trial activities.

        Net cash used in operating activities was $15.5 million for the year ended December 31, 2014 and consisted primarily of a net loss of $16.1 million, a $2.3 million non-cash gain on the change in fair value of our warrants and Investor Rights Obligation liabilities, and a decrease in our net operating assets of $0.4 million primarily due to the timing of payments related to our personnel and clinical trial activities. These decreases were offset by $3.2 million in non-cash charges that are primarily related to stock-based compensation expense, non-cash interest, and the expensing of offering costs that were initially reflected as a financing cash outflow of $1.1 million, $1.0 million and $1.1 million, respectively.

Net cash used in investing activities

        Net cash used in investing activities for the years ended December 31, 2013 and 2014 was $29,000 and $20,000, respectively. Cash used in investing activities primarily consisted of purchases of fixed assets related to purchases of furniture and computer equipment.

Net cash provided by financing activities

        Net cash provided by financing activities was $5.4 million for the year ended December 31, 2013, which was primarily due to net proceeds of $6.1 million received from the sale and issuance of our Series A-1 convertible preferred stock and warrants offset by $0.7 million in payments of deferred financing fees related to our IPO efforts.

        Net cash provided by financing activities was $23.9 million for the year ended December 31, 2014, which was primarily due to the proceeds received from our convertible debt, demand notes, and Series B convertible preferred stock equity issuance aggregating $17.3 million and $7.4 million from a term loan. We also paid $0.4 million in financing fees related to the equity and debt financings and $0.4 million for IPO-related deferred financing costs.

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Operating and Capital Expenditure Requirements

        We have not achieved profitability since our inception and we expect to continue to incur net losses for the foreseeable future. We expect our cash expenditures to increase in the near term as we fund our future development of CERC-301, CERC-501 and our COMTi platform, including preclinical development for CERC-406. Following this offering, we will be a publicly traded company and will incur significant legal, accounting and other expenses that we were not required to incur as a private company. In addition, the Sarbanes-Oxley Act, as well as rules adopted by the Securities and Exchange Commission, or SEC, and the NASDAQ Stock Market, requires public companies to implement specified corporate governance practices that are currently inapplicable to us as a private company. We expect these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. We may also acquire or in-license new product candidates.

        Based on our research and development plans and our timing expectations related to the progress of our programs, we expect that the net proceeds from this offering, together with our existing cash and cash equivalents as of June 30, 2015, will enable us to fund our operating expenses and capital expenditure requirements through the end of 2016. Each of our product candidates are still in the early stages of clinical and preclinical development and the outcome of these efforts is uncertain. We cannot estimate the actual amounts necessary to successfully complete the development and commercialization of our product candidates or whether, or when, we may generate revenue. Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity or debt financings and exploring the possibility of entering into collaboration arrangements.

        We will need to raise substantial additional financing in the future to fund our operations. In order to meet these additional cash requirements, we may seek to sell additional equity or convertible securities that may result in dilution to our stockholders. If we raise additional funds through the issuance of convertible securities, these securities could have rights senior to those of our common stock and could contain covenants that restrict our operations. There can be no assurance that we will be able to obtain additional equity or debt financing on terms acceptable to us, if at all. If we raise additional funds through collaboration and licensing agreements with third parties, it may be necessary to relinquish valuable rights to our product candidates, technologies or future revenue streams or to grant licenses on terms that may not be favorable to us. Our future capital requirements will depend on many forward-looking factors, including:

    the progress and results of the Phase 2 clinical program for CERC-301 and changes to our development plan with respect to CERC-301, if any;

    the progress and results of the clinical trials being conducted, or contemplated being conducted, for CERC-501 and changes to our development plan with respect to CERC-501, if any;

    our plan and ability to enter into collaborative agreements for the development and commercialization of our product candidates;

    the number and development requirements of any other product candidates that we pursue;

    the scope, progress, results and costs of researching and developing our product candidates or any future product candidates, both in the United States and in territories outside the United States;

    the costs, timing and outcome of regulatory review of our product candidates or any future product candidates, both in the United States and in territories outside the United States;

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    the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution for any of our product candidates for which we receive marketing approval;

    the costs and timing of any product candidate acquisition or in-licensing opportunities;

    any product liability or other lawsuits related to our products;

    the expenses needed to attract and retain skilled personnel;

    the revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval;

    the costs involved in preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending our intellectual property-related claims, both in the United States and in territories outside the United States; and

    the timing and success of this offering.

Please see "Risk Factors" for additional risks associated with our substantial capital requirements.

Contractual Obligations and Commitments

        The following is a summary of our long-term contractual cash obligations as of December 31, 2014 (in thousands):

Contractual Obligation(1)
  Total   Less than
One Year
  1 - 3 Years   3 - 5 Years   More than
5 Years
 

Long Term Debt Obligations(2)

  $ 8,428   $ 2,633   $ 5,795   $   $  

Operating lease obligations(3)

    612     147     306     159      

Total contractual obligations

  $ 9,040   $ 2,780   $ 6,101   $ 159   $  

(1)
This table does not include any contingent milestone or royalty payments that may become payable to third parties under license agreements because the timing and likelihood of such payments are not known.

(2)
Amount represents principal and interest cash payments over the life of the debt obligations, including anticipated interest payments that are not recorded on our balance sheet.

(3)
Operating lease obligations reflect our obligations pursuant to the terms of a lease agreement entered into on August 8, 2013 for our office space located in Baltimore, Maryland.

Off-Balance Sheet Arrangements

        We do not have any off-balance sheet arrangements, as defined by applicable SEC rules and regulations.

Quantitative and Qualitative Disclosures about Market Risk

        We are exposed to market risks in the ordinary course of our business. These market risks are principally limited to interest rate fluctuations. We had cash and cash equivalents of $3.4 million, $11.7 million and $6.1 million as of December 31, 2013, December 31, 2014, and June 30, 2015, respectively, consisting of cash and money market funds. We do not enter into investments for trading or speculative purposes. We do not believe an immediate 10% increase in interest rates would have a material effect on the fair market value of our cash and money market funds, and accordingly we do

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not expect our operating results or cash flows to be materially affected by a sudden change in market interest rates.

        We contract with CROs, clinical research organizations and contract manufacturers globally. We may be subject to fluctuations in foreign currency rates in connection with some of these agreements. To date, we have not incurred material effects from foreign currency changes on these contracts. Transactions denominated in currencies other than the United States dollar are recorded based on exchange rates at the time such transactions arise.

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BUSINESS

Overview

        We are a clinical-stage biopharmaceutical company with the goal of becoming a leader in the development of innovative drugs that make a difference in the lives of patients with neurological and psychiatric disorders. We have a portfolio of clinical and preclinical compounds that we believe are best-in-class due to their unique mechanism of action and where human proof of concept has been established for the compound or the target. We are currently pursuing regulatory approval of three product candidates: CERC-301, CERC-501 and CERC-406.

        CERC-301 is currently in Phase 2 development as an oral, adjunctive treatment of patients with major depressive disorder, or MDD, who are failing to achieve an adequate response to their current antidepressant treatment and are severely depressed. We received fast track designation by the Food and Drug Administration, or FDA, in November 2013 for CERC-301 for the treatment of MDD. CERC-301 belongs to a class of compounds known as antagonists, or inhibitors, of the N-methyl-D-aspartate, or NMDA, receptor, a receptor subtype of the glutamate neurotransmitter system that is responsible for controlling neurological adaptation. We believe CERC-301 will be a "first-in-class" medication that will cause a significant reduction in depression symptoms in a matter of days, as compared to weeks or months with conventional therapies, because it selectively blocks the NMDA receptor subunit 2B, or NR2B, which we believe provides rapid and significant antidepressant activity without the adverse side effect profile of non-selective NMDA receptor antagonists. We are also currently developing CERC-501, which is in Phase 2 development. We intend to first develop CERC-501 for adjunctive treatment of MDD and for substance use disorders (e.g., nicotine, alcohol, and/or cocaine). If we receive approval for CERC-501 for adjunctive treatment of MDD and for substance use disorders, we plan to further develop CERC-501 for the concurrent treatment of MDD and substance use disorders, or co-occurring disorders. CERC-501 was acquired in February 2015, and is a potent and selective kappa opioid receptor, or KOR, antagonist. KORs are believed to play key roles in modulating stress, mood and addictive behaviors, which form the basis of co-occurring disorders. We believe that proof of concept of KOR antagonism for the adjunctive treatment of MDD is supported by Alkermes plc's, or Alkermes, Phase 2 results for ALKS-5461, which is believed to be acting as a functional kappa antagonist. Alkermes has reported positive Phase 2 results for ALKS-5461 as an adjunctive antidepressant in MDD subjects and has initiated a Phase 3 development program. We are preparing to initiate a clinical study to evaluate the effect of CERC-501 on aspects of tobacco withdrawal and reinstatement by the first half of 2016. In addition we are considering conducting a Phase 2 clinical study in inadequately treated subjects with MDD currently on antidepressants, with an initiation date in the second half of 2016. Thereafter we intend to pursue additional studies focused on substance use disorders, the adjunctive treatment of MDD and, depending on marketing approval, the treatment of co-occurring disorders. CERC-406 is our preclinical lead candidate from our proprietary platform of compounds that inhibit catechol-O-methyltransferase, or COMT, within the brain, which we refer to as our COMTi platform. We anticipate developing CERC-406 for the treatment of residual cognitive impairment symptoms in patients with MDD.

        Members of our management team have extensive pharmaceutical product development and commercialization experience and they have played key roles in the development or commercialization of Prozac®, Zyprexa®, Lyrica®, Cymbalta®, Neurontin® and Abilify®, each of which is a neuroscience product that has generated over $1.0 billion of annual revenues. Collectively, our officers and directors have contributed to the submission of numerous Investigational New Drug Applications, or INDs, and nine New Drug Applications, or NDAs, to the FDA. Leveraging the experience of our management team, within the last 24 months we obtained IND clearance and received fast track designation for CERC-301 from the FDA, completed two clinical trials of CERC-301, selected CERC-406 as our preclinical lead candidate from our COMTi platform and, most recently, broadened our clinical pipeline by in-licensing CERC-501.

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Our Strategy

        Our goal is to be a leader in the development of innovative drugs that make a difference in the lives of patients with neurological and psychiatric disorders. We systematically identify platforms and product candidates for which human proof of concept exists in the intended indication, for either the target or the compound, and for which biomarkers are available to measure therapeutic response. We target conditions where we believe current treatments fail to address unmet medical needs, and where we can apply clinical strategies to increase efficacy signal detection. These strategies include using personalized therapeutic approaches and placebo mitigation techniques to facilitate regulatory approval for our product candidates.

        Our strategic objectives include:

    Rapidly Advance the Clinical Development of CERC-301.  We are currently developing CERC-301 as an oral, adjunctive medication for patients with MDD who are failing to achieve an adequate response to their current antidepressant treatment and are severely depressed. We have recently completed a seven day, inpatient exploratory Phase 1 study of CERC-301 in 48 healthy volunteers in order to determine maximal dose range, in addition to an outpatient Phase 2 clinical trial of an 8 mg daily dose of CERC-301 as an adjunctive therapy in 137 subjects who were severely depressed despite ongoing antidepressant treatment and, who have recently experienced active suicidal ideation. In the third quarter of 2015, we initiated a Phase 2 efficacy study for CERC-301 in order to evaluate doses greater than 8 mg and a revised dosage regimen. If we demonstrate safety and efficacy in these and subsequent Phase 2 and 3 studies, we will consider also initiating separate development programs in other indications, such as active suicidal ideation, bipolar depression and other neuropsychiatric conditions.

    Rapidly Advance the Clinical Development of CERC-501.  We plan to initiate a proof of concept clinical trial in nicotine dependence by first half of 2016, which will provide us with the opportunity to evaluate the effect of CERC-501 on tobacco reinstatement behavior and assess subjects' craving, mood and anxiety during abstinence periods. We also expect to receive data from three additional studies concerning CERC-501, in cocaine addiction, treatment resistant depression, or TRD, and the inability to experience pleasure, or anhedonia, two of which are being conducted under the auspices of the National Institute of Mental Health, or NIMH. Thereafter we are considering conducting a Phase 2 clinical study in inadequately treated subjects with major depressive disorder currently on antidepressants, with an initiation date in the second half of 2016. If these studies are successful, we plan to develop CERC-501 as a treatment of substance use disorders, a once-a-day, oral adjunctive treatment of MDD, and, depending on marketing approval, the treatment of co-occurring disorders.

    Advance CERC-406 into IND-enabling Studies.  We anticipate developing CERC-406 as a "first-in-class," oral, adjunctive treatment for patients with residual cognitive impairment symptoms suffering from MDD. We expect to complete IND-enabling studies and submit an IND for CERC-406 by the first half of 2017.

    Use our COMTi Platform to Build a Pipeline of Product Candidates for Conditions Where Impaired Executive Function is a Core Symptom. By targeting COMT inhibition, for which human proof of concept in multiple conditions exists for the COMT inhibition class of drugs, we believe we have the ability to address the impairment of executive function in a highly specific manner, guided by biomarkers and pharmacogenomics. Our COMTi platform, which we licensed from Merck & Co., Inc. and its affiliates, or Merck, provides exclusive access to a library of approximately 1,800 compounds that we believe may penetrate the nervous system and preferentially inhibit COMT in the brain. In 2015 and 2016, in addition to progressing the development of CERC-406, we intend to establish the data set necessary to select additional lead candidates from the library for treatment of various conditions where impaired executive

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      function is a core symptom. In addition to compounds that we may develop on our own, we are exploring early development collaborations with third parties on an indication-specific basis in order to maximize the value of our COMTi platform.

    Establish Specialty Segment Commercialization and Marketing Capabilities in the United States. We intend to selectively retain commercialization rights for certain of our product candidates and to build specialty commercialization capabilities in the United States, which we may complement with co-promotion agreements with partners. We may also seek to commercialize any of our approved products outside of the United States, although we plan to do so with one or more collaborators.

    Establish Collaborations to Maximize Value.  Collaborations, through licenses or strategic partnerships, may provide access to the considerable scientific, development, regulatory and commercial capabilities of biopharmaceutical corporations, potentially providing us with additional infrastructure to more efficiently develop and commercialize assets in our product candidate portfolio. Our selection criteria for potential partners include market presence in complementary areas and geographies, in addition to a demonstrated ability to contribute to the creation of the highest quality data sets and registration materials for submission to regulatory authorities when we seek marketing approval for our product candidates.

    Expand our Product Candidate Portfolio Through In-Licensing and Strategic Acquisitions.  In migrating away from the centralized research and development model of the past, many major pharmaceutical companies have deemphasized their neuroscience discovery and development programs in recent years. Given our focus and expertise, these programs may represent compelling acquisition opportunities. We believe we have the ability to identify, evaluate and procure valuable product programs that are consistent with our goal of becoming a leader in the development of innovative drugs that make a difference in the lives of patients with neurological and psychiatric disorders. We plan to continue to leverage these opportunities to expand our product candidate portfolio in a fashion that fits within our core strategy and enhances our overall value.

Product Pipeline

        The following table summarizes key information about our three product candidates and further detail regarding each product candidate follows:

Product Candidate /
Platform
  Potential Indication(s)   Stage of
Development
  Anticipated Milestones
CERC-301   Adjunctive treatment of MDD with rapid onset   Phase 2   Data in the second half of 2016

CERC-501

 

Substance use disorders
Adjunctive treatment of MDD
Co-occurring disorders

 

Phase 2

 

Data in the second half of 2016

CERC-406

 

Residual cognitive impairment symptoms in MDD

 

Preclinical

 

IND submission anticipated in the first half of 2017

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CERC-301

Current Depression Treatment Paradigm and Limitations

        Depression is one of the most common serious medical and psychiatric disorders, with greater than 150 million adults worldwide suffering from MDD at any given time, according to a 2003 report by the World Health Organization, or WHO, titled Investing In Mental Health. According to the U.S. National Comorbidity Survey Replication published in 2007, or the NCS-R, more than 16 million adults in the United States, which represents approximately 6.7% of its entire adult population, will suffer from a MDD episode in a 12 month period. Furthermore, according to the NCS-R, approximately 45% of these cases can be classified as severe, and suicide is often a grave complication associated with depression. Studies have shown that approximately 50% to 70% of severely depressed patients have experienced suicidal ideation. Over time, the understanding of psychiatric and neurological disorders, as well as their biological underpinnings, has evolved based on a combination of clinical and pre-clinical research. Over the past 50 years, many depression therapies and hypotheses have primarily been based on changing the levels of monoamine neurotransmitters, such as serotonin, norepinephrine and dopamine, in the brain. Manipulating these neurotransmitters impacts mood, but monoamine antidepressants are slow in onset, requiring multiple weeks for patients to obtain a response and patients may suffer from sexual dysfunction and other side effects from such treatment.

        Numerous studies have shown that many patients do not respond to their initial antidepressant therapy. For example, according to a 2006 report titled Acute and Longer-Term Outcomes in Depressed Outpatients Requiring One or Several Treatment Steps: A STAR-D Report, or the STAR-D Report, 51.4% of patients failed to respond, defined as achieving a 50% reduction in symptoms, and only 36.8% became symptom free, or achieved remission, after their initial 12-week treatment course with monoamine antidepressants. As such, physicians commonly will switch patients' antidepressants to manage depression, and patients may require two or three courses of treatment, before achieving satisfactory relief. The depression may persist following a course of treatment and additional medications may need to be used adjunctively. These adjunctive agents may include atypical antipsychotics, like aripiprazole and quetiapine, or other agents such as buproprion, and lithium. While certain patients experience improvement in their depressive symptoms when these additional therapies are added to their existing treatments, many do not. For example, according to a study published by Dr. Robert Berman and others in 2007, entitled The Efficacy and Safety of Aripiprazole as Adjunctive Therapy in Major Depressive Disorder: A Multicenter, Randomized, Double-Blind, Placebo-Controlled Study, only 32.4% of patients with treatment resistant depression responded to six weeks of adjunct treatment of the atypical antipsychotic aripiprazole.

        According to the IMS Institute for Healthcare Informatics' 2012 report titled The Use of Medicines in the United States: Review of 2011, over 264 million prescriptions totaling $11 billion were filled for depression in the United States in 2011. According to the STAR-D Report most marketed depression therapies are subject to significant limitations, including:

    Time to therapeutic response.  Current monoamine antidepressants are slow in onset, allowing depressive symptoms to persist for multiple weeks before patients experience the onset of the drugs' therapeutic effect; full effect is frequently not seen until 12 weeks.

    High rates of treatment failures and low rates of remission.  Even with the widespread availability of serotonin reuptake inhibitors, or SSRIs, or serotonin norepinephrine reuptake inhibitors, or SNRIs, MDD remains a leading cause of disability in the world. According to the STAR-D Report, which was funded by the NIMH, despite four courses of different antidepressant medications, 33% of patients did not achieve remission.

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    Side effects.  Common side effects seen with current depression therapies include gastrointestinal disturbance, dizziness, drowsiness, insomnia and sexual dysfunction. A common symptom of depression is a loss of libido. Compounding this issue, although most side effects associated with SSRIs and SNRIs subside within the first few weeks of treatment, sexual dysfunction often persists throughout the course of treatment. According to the STAR-D Report, many patients who experience side effects discontinue treatment. In addition, currently used adjunctive treatments include antipsychotic agents which have both efficacy and treatment-limiting side effects, including weight gain, increased risk of diabetes and cardiovascular risk.

Emergence of NMDA Receptor Antagonists as Antidepressants

        Recently, a new class of antidepressant has emerged known as antagonists of the NMDA receptor, a receptor subtype of the glutamate neurotransmitter system that is responsible for controlling neurological adaptation. Research on ketamine, such as A Randomized Trial of an N methyl D aspartate Antagonist in Treatment Resistant Major Depression study conducted from November 2004 to September 2005 by Dr. Carlos A. Zarate, Jr. and others, has provided evidence that NMDA antagonists can provide significant antidepressant mood effects within 24 hours of administration, acting as rapid acting antidepressants, or RAADs, in MDD and bipolar depression. Moreover, research has also demonstrated that ketamine causes a rapid reduction in suicidal ideation, in contrast to conventional antidepressants that may actually worsen suicidal ideation in children, adolescents, and young adults. We believe efficacy of the class is further supported by the off-label use of ketamine throughout the United States for treatment resistant bipolar depression and MDD.

        Accumulating evidence, such as that discussed in an article published in 2014 by Ronald Duman and others, titled Neurobiology of Stress, Depression, and Rapid Acting Antidepressants: Remodeling Synaptic Connections, suggests that the antidepressant effect of this new class of antidepressant, as demonstrated by the study of ketamine, is associated with increasing synaptic connections in the brain, which is driven by increases in the synthesis of neuronal proteins. A messenger of this synthetic activity is brain derived neurotrophic factor, or BDNF, which we believe is increasingly considered to be a biomarker of depression and anti-depressant effect. BDNF levels have been found to be low in subjects with major depression compared to normal controls, correlate negatively with the severity of depression and recover to levels associated with normal subjects after successful antidepressant treatment. However, non selective NMDA antagonists such as ketamine have significant limitations. Ketamine is an anesthetic, is not approved for use as an antidepressant, and causes increases in heart rate and blood pressure, hallucinations and other psychological manifestations. In addition, psychiatric use of ketamine may be limited by the need for intravenous administration, the unapproved nature of the use of the drug for the sub chronic treatment of MDD and, as a result, the unknown safety profile, and the need for repeated infusions to maintain a treatment response. Ketamine is scheduled by the Drug Enforcement Administration or DEA, as a Schedule III controlled substance and is prone to abuse. The classification of ketamine as a Schedule III controlled substance means that manufacturers, distributors, and health care providers that handle or prescribe ketamine must, among other things, register with the DEA, keep accurate and complete records, take special precautions to secure the drug and prevent its loss or theft, and may need to periodically file reports with the DEA. These extra regulatory requirements may increase the cost of manufacturing, distributing and prescribing the drug.

        Recent research has unveiled new insights into NMDA inhibition and the neurobiology of depression, and points to new classes of antidepressant medications such as antagonists of the NR2B subunit containing NMDA receptors. We believe that NR2B inhibitors, which work on the glutamate system by blocking only NR2B containing NMDA receptors, have the potential to provide rapid and significant antidepressant activity without many of the adverse side effects of ketamine and other non selective NMDA receptor antagonists, as demonstrated in clinical trial published in 2012, titled Investigational NMDA Receptor Modulators for Depression, conducted by B. Szewczyk and others.

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According to a 2013 Decision Resources report, Unipolar Depression, patients suffering from MDD need more effective agents with a faster onset of action, a higher remission rate, better efficacy for comorbid symptoms and a better side effect profile than that of conventional monoamine drugs—all potential qualities of this new class of antidepressants.

Our Solution

        CERC-301 is a selective NR2B antagonist that we are currently developing as a "first-in-class," oral adjunctive medication for patients with MDD who are failing to achieve an adequate response to their current antidepressant treatment and are severely depressed. Furthermore, we believe CERC-301 will have a rapid onset of effect, be well tolerated and may have fewer side effects than the leading adjunctive treatments currently available, such as atypical antipsychotics, whose treatment efficacy is hindered by side effects such as weight gain and increased risk of diabetes. We expect that a drug with these attributes will lead to improved compliance and outcomes. We believe an antidepressant with rapid onset of effect can possibly provide its greatest benefit by quickly relieving suicidality, a risk factor for suicide. Studies have shown that approximately 50% to 70% of severely depressed patients have experienced suicidal ideation.

        We licensed MK-0657, which is now known as CERC-301, from Merck and we believe that its selective NR2B inhibition has the potential to provide both the rapid antidepressant and suicidality reduction effects of non-selective NMDA antagonists, without many of their side effects, including increases in heart rate, blood pressure and mental status changes. Preliminary studies by Merck in healthy subjects failed to demonstrate clinically significant changes in mental status, however, modest changes in blood pressure were observed. As discussed in a 2009 article titled Allosteric Modulators of NR2B-Containing NMDA Receptors: Molecular Mechanisms and Therapeutic Potential, there is animal evidence that compounds selectively targeting NR2B receptor subunits, such as CERC-301, retain many of the beneficial effects while reducing many of the less desirable side effects of other NMDA antagonists.

        We believe CERC-301 may have the following advantages over ketamine and other non-selective NMDA antagonists:

    minimal psychotomimetic effects, including hallucinations and intoxication;

    available in a convenient, oral dosing form suitable for daily or intermittent dosing; and

    ability to use for the prevention of a relapse of depression.

        Additionally, we believe that CERC-301 may have the following advantages over conventional antidepressant therapies and currently approved adjunctive therapies:

    more rapid onset of action, including reduction in suicidality;

    higher rate of response and remission;

    reduced/absent sexual side-effect profile; and

    enhanced safety profile with respect to weight gain and increased risk of diabetes.

        We received fast track designation for CERC-301 in November 2013 for the treatment of MDD. Fast track designation may help facilitate our development of CERC-301 and expedite the FDA's review of our marketing application as it may allow us to have more frequent meetings and correspondence with the FDA and the FDA may initiate review of sections of an NDA on a rolling basis before the application is complete.

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Our Program

    Current Development Status

        In August 2012, Dr. Lobna Ibrahim and others at the NIMH reported the results of a study of CERC-301 titled A Randomized, Placebo-Controlled, Crossover Pilot Trial of the Oral Selective NR2B Antagonist MK-0657 in Patients with Treatment-Resistant Major Depressive Disorder, which we refer to as the 2012 NIMH Study. The study was conducted in five subjects with moderate TRD, as indicated by the subject's baseline scores on the Hamilton Depression Inventory 17 item scale, or HAMD-17. The 2012 NIMH Study demonstrated increases in plasma BDNF and a rapid onset of antidepressant effect of CERC-301 in TRD subjects without observations of significant changes in blood pressure or other side effects commonly seen with non-selective NMDA receptor antagonists. In 2014, we completed an exploratory inpatient pharmacokinetic, or PK, and pharmacodynamics, or PD, study in healthy volunteers, which we refer to as the PK/PD study, and a Phase 2 outpatient efficacy study for the adjunctive treatment of subjects with severe MDD who had recently experienced suicidal ideation. The PK/PD study provided evidence of safety and tolerability at daily doses up to 20 mg for seven days. Plasma levels of BDNF appeared to be higher in subjects receiving 16 mg and 20 mg doses of CERC-301 as compared to those subjects receiving placebo. In the Phase 2 study, CERC-301 was administered daily at a dose of 8 mg for 28 days as an adjunctive treatment to subjects' current medications. The primary endpoint was antidepressant effect at seven days as measured by the HAMD-17. The 8 mg dose was well tolerated, and there were no differences in mean blood pressure effects or heart rate between the treatment groups. However, the 8 mg dose of CERC-301 failed to achieve its primary endpoint and plasma BDNF levels did not change, which we believe suggests that drug exposure was inadequate. Given the safety and tolerability observed and the increases in BDNF seen at higher doses in the PK/PD study, we proposed to the FDA that doses higher than 8 mg can be tested in outpatient depression studies and that the potential of CERC-301 may be optimized with a higher dosing regimen. The FDA had no comments regarding the higher dosing regimen. We have recently initiated a Phase 2 study utilizing a higher dose and a revised dosing regimen, Clin301-203, with results becoming available in the second half of 2016.

        Study Clin301-203:    A Randomized, Double-Blind, Placebo-Controlled Study of Intermittent Doses of CERC-301 in the Treatment of Subjects with Severe Depression Despite Antidepressant Treatment

        Study Overview:    Clin301-203 is designed as a randomized, double blinded placebo-controlled trial in order to distinguish effects of drug treatment in an efficient and unbiased manner. We will evaluate the antidepressant effect of 12 mg and 20 mg doses of CERC-301 and enroll approximately 104 subjects with MDD who are currently experiencing a severe depressive episode despite stable ongoing treatment with either a SSRI or SNRI. This study will enable us to evaluate both the rapid onset of antidepressant effect and the duration of effect of CERC-301 over a seven and 14 day period after the last administration of the study drug.

        Study Design:    Clin301-203 includes two dose administrations seven days apart, followed by 14 days of observation, for a total study duration of 42 days. The primary objective of Clin301-203 is to evaluate the antidepressant effect of CERC-301, in 12 mg and 20 mg dosages, compared to placebo averaged between two and four days post-treatment with study drug, assessed by the 6-item unidimensional sub-set of the HAMD-17, or Bech-6. This approach will allow detection of acute drug effects as well as duration of drug effect. The key secondary objectives include evaluating the antidepressant effect of CERC-301 averaged between two and four days post-study drug administration, assessed by the HAMD-17 and the 7-item unidimensional subset of the HAMD-17, or the Santen-7. In addition, the antidepressant effects of CERC-301 at two, four and seven days after each dose and 14 days after last administration of study drug assessed by the Bech-6, Santen-7, HAMD-17, Clinically Useful Depression Outcome Scale-Anxiety Self Report, or CUDOS-A-SR, and Snaith-Hamilton Pleasure Scale Self Report, or SHAPS-SR will be evaluated. Antidepressant effect will also be assessed

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using the Quick Inventory of Depressive Symptomatology Self Report, or QIDS-SR, Clinical Global Impression-Improvement, or CGI-I, and CGI-Severity, or CGI-S at seven days after each dose and 14 days after last administration of study drug. We will also evaluate the safety and tolerability of intermittent doses of CERC-301, and the relationship between baseline symptoms and rate/magnitude of response. Qualified site raters will administer clinician-administered scales and the subjects will administer self-reported scales. Clin301-203 will include a total of nine study visits, with four of the nine visits conducted remotely via telephone in order to mitigate the burden on the subjects.

        Enrollment Strategies:    The study will be performed in subjects with MDD currently experiencing a severe depressive episode despite current stable treatment with either a SSRI or SNRI. Subjects will be screened directly from psychiatric clinic referrals, from depression clinical study databases, and from advertising. Potential subjects will be screened by the study sites for all inclusion, exclusion and diagnostic criteria in order to determine eligibility for the study. Subjects will also be screened via an independent third party to determine eligibility.

        Adjunctive Therapy:    CERC-301 will be administered as an adjunctive therapy to current antidepressant treatment in subjects who have failed to adequately respond to their current therapy. We believe that initially pursuing approval as an adjunctive treatment addresses a key unmet medical need while enhancing our ability to achieve appropriate level of pricing, formulary access and reimbursement.

    Summary of Prior Clinical and Preclinical Studies

    Clinical Studies

        Clin301-201:    A Randomized, Double-Blind, Placebo-Controlled, Sequential Parallel Study of CERC-301 in the Adjunctive Treatment of Subjects with Severe Depression and Recent Active Suicidal Ideation Despite Antidepressant Treatment

        Clin301-201 randomized 137 subjects to evaluate safety and efficacy of an 8 mg dose of CERC-301 for 28 days using a sequential parallel comparison design, or SPCD design. The primary endpoint of the study was to evaluate the antidepressant effect of CERC-301 after seven days of treatment assessed by the HAMD-17. Secondary endpoints were to evaluate the sustained antidepressant effect defined as the average between seven and 28 days of study drug treatment and the antidepressant effect of CERC-301 after 28 days of treatment assessed by the HAMD-17. In accordance with the SPCD experimental paradigm, subjects were randomized to one of three treatment sequences: 28 days of CERC-301 followed by seven days of placebo (12 mg loading dose on day 0 followed by 8 mg dose for 28 days), seven days of placebo followed by 28 days of CERC-301, or 35 days of placebo. While there was a slight numerical superiority for CERC-301 for the seven day primary endpoint, the results failed to reach statistical significance. There was no evidence for antidepressant effect at the 28 day endpoint, while numerical superiority for placebo was observed. There were no clinically meaningful or statistically significant changes in plasma BDNF levels with CERC-301 compared with placebo. There were no differences in mean blood pressure effects or heart rate between the treatment groups. We believe the lack of significant changes in plasma BDNF levels and blood pressure effects suggest drug exposure was inadequate in this study and that higher exposures should be explored in future studies. Additionally, we believe that refining our patient selection and changing our primary efficacy endpoint will improve the probability of producing positive future study results.

        In general, CERC-301 was well tolerated with rates of adverse events similar to that of placebo. The most common treatment emergent adverse events were nervous system disorders, occurring in 25.9% and 26.9%, respectively, of subjects in the two active treatment sequences compared to 22.4% of subjects who received placebo during the entire study. Of the nervous system treatment emergent adverse events, dizziness was most common, occurring in 18.5% and 7.7%, respectively, of subjects in the two active treatment sequences compared to 2.0% of subjects who received placebo during the

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entire study. There was no difference in mean blood pressure effects in active groups compared to the placebo group. There was no detectable pattern of blood pressure increase either at pre-dose clinic measurements or transiently after dosing. Four serious adverse events in three subjects were reported during the conduct of the study, two in a subject randomized to placebo (suicide attempt; alcoholism) and two in subjects that received CERC-301 (worsening depression with psychotic features and unstable angina).

        Clin301-200-A:    A Randomized, Double-Blind, Placebo-Controlled, Parallel-Group, Two-Part Safety, Pharmacokinetic, and Pharmacodynamic Study of CERC-301 in Healthy Subjects

        In the fourth quarter of 2014 we completed a 48-subject, three-part, seven day, inpatient exploratory study of CERC-301. The study investigated the dose-response relationship between CERC-301 and pharmacodynamic effects on blood pressure and BDNF in healthy subjects, including young, intermediate and elderly cohorts, and provided the repeat dose response data needed to support studies of CERC-301 at possibly higher doses and in larger, more diverse subject populations. Doses of 8 mg to 20 mg were administered in an inpatient setting to better understand the relationship among dose, plasma concentrations and adverse event profile, and to assess potential effects of subject age and gender. The study demonstrated near linear PK profile for CERC-301 with doses up to 20 mg daily in fed-state subjects being well tolerated. Some of the most commonly reported adverse events across the young dose groups were headache, feeling of relaxation, feeling abnormal, elevated mood, dizziness, increased energy, longorrhea, sedation, abnormal vision and palpitations. Overall, there were no clear-cut dose-related or age-related differences in adverse events. Relative to placebo, subjects who received CERC-301 demonstrated an increase in blood pressure, as measured by ambulatory blood pressure measurements, at all dose levels and experienced a trend of increased average 7-day BDNF levels at 16 mg and 20 mg. Blood pressure appeared to have the biggest change in the first four days of dosing for all doses, except for the 20 mg dose, which increased further from Day 4 to Day 7, consistent with CERC-301 exposure profile, which reaches steady state values by day five or six of dosing. Relative to placebo, the mean awake time ambulatory systolic blood pressure changes were £ 8 mm Hg on average across all doses on days one, four and seven, except in the 20 mg group, where on average there was a 9-15 mm Hg elevation in systolic blood pressure. There was no apparent age effect on blood pressure elevations across the three age groups and this study demonstrated no clear difference between genders across various cohorts. Ambulatory blood pressure measurements demonstrated that the maximum change generally occurred between two and three hours post-dose, consistent with CERC-301 peak plasma exposure in fed-state. We believe that these blood pressure results will be transient in our CLIN301-203 study as a result of the revised dosing schedule.

    Human Proof of Concept Study in Treatment Resistant Depression

        The 2012 NIMH Study was a single center, randomized, double-blind, placebo-controlled crossover study of five subjects with TRD to evaluate the potential antidepressant efficacy and tolerability of CERC-301. It was conducted at the Clinical Research Center of the NIMH-NIH, where subjects were hospitalized for the duration of the study. Male and female subjects of the NIMH, ages 18 to 55 years, were recruited to participate; all subjects were diagnosed with MDD and were currently depressed without psychotic features. Subjects were required to have a score of 22 or higher on the Montgomery-Asberg Depression Rating Scale, or MADRS, at screening and at baseline, the day of first dose of study medication. In addition, subjects had to have previously failed at least two adequate antidepressant trials in the current depressive episode. Exclusion criteria included, but was not limited to, a recent history of drug abuse, diagnosis of bipolar disorder, psychotic features, suicidal ideation, serious unstable medical disorder or condition, previous use of ketamine or phencyclidine, and concomitant treatment with psychotropic medications in the two weeks before the study or electroconvulsive therapy in the three months before the study.

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        Following a one week drug-free period, five subjects were randomized in a double-blind manner to receive either CERC-301 or placebo for 12 days. Initial doses were 4 mg/day of CERC-301 for four days, then escalated to 6 mg/day for four days and then 8 mg/day for four days. The study's medication dose was increased in a blinded fashion every four days until completion of the treatment. At day 12, the study drug was discontinued; subjects remained drug-free for 14 days and then crossed over to the other treatment condition. Dosage in the second experimental treatment condition (days 27 through 38) was identical to the first crossover phase. By day nine, plasma BDNF levels were significantly higher in subjects receiving CERC-301 than in those receiving placebo, with p = 0.03. The results of a clinical trial are statistically significant if they are unlikely to have occurred by chance. Statistical significance of the trial results are typically based on widely used, conventional statistical methods that establishes the p-value of the results. A p-value of 0.05 or less is required to demonstrate statistical significance. As such, these BDNF levels are considered to be statistically significant.

        CERC-301 demonstrated significant antidepressant effects as early as day five and nine compared to placebo, in two of the three standard scales used in assessing antidepressant response, the HAMD-17 (p=0.001) and Beck Depression Inventory, or BDI (p = 0.01) respectively. These two scales were two of the study's secondary endpoints. There were no significant adverse side effects observed, including changes in blood pressure. No improvement was noted with the third antidepressant scale, the MADRS, which was the primary efficacy parameter of the study. The following chart illustrates the results on the HAMD-17 antidepressant response scale:


Treatment effect emerged after 6mg daily
dose and was sustained

GRAPHIC

        Additional Phase 1 Studies:    In 2004 through 2005, three Phase 1 clinical trials of CERC-301 in a total of 60 healthy volunteers receiving the study drug, were completed by Merck, each of which measured the safety and assessed the pharmacokinetics, or PK, of CERC-301. The first study, Study 001, measured single doses of the drug in a healthy, fasted and fed and young male population. The second study, Study 002, measured multiple doses in a healthy, fed and young male population. The final study, Study 003, measured single doses in healthy elderly male and female populations.

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CERC-301 was generally well tolerated, with the exception of dose-related increases in blood pressure, increases in orthostatic heart rate in three subjects, a mild decrease in blood pressure in one subject, and some adverse events of which central nervous system-related adverse effects were most common. Such adverse events were transient and mild to moderate in severity. No serious adverse effects were experienced in these studies. In subjects who received the highest dose of 20 mg while fasting, adverse events such as mild forgetfulness, dizziness, drowsiness, headache, lightheadedness, and difficulty concentrating were observed. Further, no clinically significant abnormalities were noted in respiratory rate, routine blood and urine chemistry panels, electrocardiogram tests, or physical examinations, including neurologic examinations.

        Two additional Phase 1B studies were completed in subjects with moderate Parkinson's disease, for a total of 38 subjects, which did not show efficacy to control movement disorders. However, while some non-serious adverse events were found, contrary to what was observed in earlier studies, both studies, at single doses of 7 mg in the fed state, showed no clinically significant blood pressure elevations compared to placebo.

    Preclinical Studies

        Preclinical studies conducted by Merck include the evaluation of safety pharmacology, PK and toxicology of CERC-301 in conscious animals, all of which have demonstrated a safety profile sufficient to enable ongoing and planned human clinical studies. The engagement of CERC-301 with brain NR2B, or target engagement, has also been demonstrated in rats, dogs, monkeys and in human cadaver tissue. The predicted blood exposure required to achieve target engagement has been described in these species. Live animal model studies have provided promising support for CERC-301's efficacy in treating Parkinson's disease related movement disorders, chronic pain and depression. In 2014, we conducted a Forced Swim Test, or FST, study that is a validated animal model of clinical MDD that demonstrates predictive validity for all known classes of effective antidepressants. Antidepressant-like activity is indicated by reductions in immobility. We tested doses of CERC-301 at 0.1, 0.3, 1, 3, 10, or 30 mg/kg and determined that CERC-301 exhibited antidepressant effects at the 1, 3, 10, and 30 mg/kg dose levels compared to the vehicle. Additional preclinical studies are ongoing.

    Future Clinical Development

        Upon completion of Clin301-203, and dependent upon study results, we will conduct a multi-dose, six week Phase 2b study as adjunctive treatment in subjects with MDD who are currently experiencing a severe depressive episode despite stable ongoing treatment with a SSRI or SNRI. We expect to initiate this dose ranging study in the first half of 2017. Thereafter we plan to engage the FDA in an end-of-phase 2 meeting to align plans and activities for potential regulatory approval which would include Phase 3 clinical studies, non-clinical NDA enabling studies and manufacturing activities.

CERC-501

Adjunctive Treatment of Major Depressive Disorder, Substance Use Disorders, & Treatment of Co-Occurring Disorders

        We intend to first develop CERC-501 for adjunctive treatment of MDD and for substance use disorders (e.g., nicotine, alcohol, and/or cocaine). If we receive approval for CERC-501 for adjunctive treatment of MDD and for substance use disorders, we plan to further develop CERC-501 for the concurrent treatment of MDD and substance use disorders, or co-occurring disorders.

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Adjunctive Treatment of Major Depressive Disorder

        Depression is one of the most common serious medical and psychiatric disorders, with greater than 150 million adults worldwide suffering from MDD at any given time, according to a 2003 report by the World Health Organization, or WHO, titled Investing In Mental Health. According to the U.S. National Comorbidity Survey Replication published in 2007, or the NCS-R, more than 16 million adults in the United States, which represents approximately 6.7% of its entire adult population, will suffer from a MDD episode in a 12 month period. Furthermore, according to the NCS-R, approximately 45% of these cases can be classified as severe, and suicide is often a grave complication associated with depression. Studies have shown that approximately 50% to 70% of severely depressed patients have experienced suicidal ideation.

        Numerous studies have shown that many patients do not respond to their initial antidepressant therapy. For example, according to a 2006 report titled Acute and Longer-Term Outcomes in Depressed Outpatients Requiring One or Several Treatment Steps: A STAR-D Report, or the STAR-D Report, 51.4% of patients failed to respond, defined as achieving a 50% reduction in symptoms, and only 36.8% became symptom free, or achieved remission, after their initial 12-week treatment course with monoamine antidepressants. As such, physicians commonly will switch patients' antidepressants to manage depression, and patients may require two or three courses of treatment, before achieving satisfactory relief. The depression may persist following a course of treatment and additional medications may need to be used adjunctively. These adjunctive agents may include atypical antipsychotics, like aripiprazole and quetiapine, or other agents such as buproprion and lithium. While certain patients experience improvement in their depressive symptoms when these additional therapies are added to their existing treatments, many do not. For example, according to a study published by Dr. Robert Berman and others in 2007, entitled The Efficacy and Safety of Aripiprazole as Adjunctive Therapy in Major Depressive Disorder: A Multicenter, Randomized, Double-Blind, Placebo-Controlled Study, only 32.4% of patients with treatment resistant depression responded to six weeks of adjunct treatment of the atypical antipsychotic aripiprazole.

Substance Use Disorders

        Drug abuse is a major public health problem that impacts society on multiple levels. According to Results from the 2013 National Survey on Drug Use and Health, a survey conducted by the Substance Abuse and Mental Health Services Administration, in 2013, an estimated 21.6 million persons in the United States aged 12 or older (8.2 percent) were classified with substance dependence or abuse in the past year based on criteria specified in the Diagnostic and Statistical Manual of Mental Disorders, 4th edition. Of these, 2.6 million were classified with dependence or abuse of both alcohol and illicit drugs, 4.3 million had dependence or abuse of illicit drugs but not alcohol, and 14.7 million had dependence or abuse of alcohol but not illicit drugs. Illicit drugs include marijuana/hashish, cocaine (including crack), heroin, hallucinogens, inhalants, or prescription-type psychotherapeutics (pain relievers, tranquilizers, stimulants, and sedatives) used nonmedically. Furthermore, in 2013, heavy drinking was reported by 6.3 percent of the population aged 12 or older, or 16.5 million people.

        Cigarette smoking and exposure to tobacco smoke are the leading causes of preventable disease and death in the United States, resulting in more than 480,000 premature deaths and $289 billion in direct health care expenditures and productivity losses each year. In 2013, 55.8 million persons (21.3 percent of the population) were current cigarette smokers. Despite progress over the past several decades, millions of adults still smoke cigarettes, the most commonly used tobacco product in the United States, and this continues to be major public health problem.

Co-Occurring Disorders

        Without considering nicotine dependence, there are more than 5 million adults in the United States alone who suffer from co-occurring depression and substance use disorders. Such comorbidities

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put patients at greater risk. For instance, depending on when MDD onset occurs, MDD has been found to be related to the course of substance dependence, impacting areas such as remission of substance dependence and relapse into substance dependence after stable remission. Recent research suggests that a history of MDD is associated with a decreased ability to quit smoking and MDD over the last year is associated with an increased likelihood of smoking relapse. One common link between the co-occurrence of depression and substance use disorders may be stress. Sustained stressful experiences can induce despair and increase the risk of clinical depression and substance use. Stress and mood are significant components of addiction relapse as discussed in a 2000 article written by Watkins et al., titled Neural Mechanisms Underlying Nicotine Addiction: Acute Positive Reinforcement and Withdrawal published by the Journal of Nicotine & Tobacco Research. Substance use often provides relief from stress, such that the substance of abuse often becomes a potent behavioral reinforcer. Present pharmacologic treatments for co-occurring disorders consist either of treatment for the psychiatric disorder or the treatment for the addiction, but not the treatment of the underlying connection between the two. For example, the nonselective opioid antagonist naltrexone, an FDA-approved medication for alcohol dependence in patients who are able to abstain from alcohol in an out patient setting prior to treatment initiation, is not FDA approved as an antidepressant or an antianxiety agent. The smoking cessation aid varenicline, a mixed nicotinic agent, is associated with depression as a serious side effect. Similarly, antidepressant medication exerts a modest beneficial effect for patients with combined depressive and substance-use disorders. It is not a stand-alone treatment, and concurrent therapy directly targeting the addiction is also indicated, according to a 2004 review written by Nunes and Levin titled Treatment of Depression in Patients with Alcohol or Other Drug Dependencies: A Meta-analysis, published in the Journal of the American Medical Association (JAMA). Therefore, we believe a tremendous need exists for pharmacotherapies effective in the treatment of co-occurring disorders.

Mood, Stress, Addiction and Kappa Opioid Receptors

        Kappa opioid receptors, or KORs, and their native ligand dynorphin are localized in areas of the brain which effect reward and stress and are believed to impact mood, stress and addictive disorders. As discussed in a paper by Shippenberg et al., titled Dynorphin and the Pathophysiology of Drug Addiction and published in the Journal of Pharmacology and Therapeutics in 2007, both KORs and dynorphin, together comprising the kappa opioid system, are upregulated by stress and chronic exposure to drugs of abuse, are thought to mediate the negative emotional states seen in drug withdrawal and contribute to stress-induced reinstatement of drug seeking behavior. In animal models it has been observed that stress produces a depressive state that is believed to be associated with the activation of KOR and subsequent downstream signaling events. Administration of agents that stimulate the KOR system, or KOR agonists that act like dynorphin, decrease dopamine levels in areas of the brain involved with executive function, produce anxiety-like and depression-like behaviors in animals, exacerbate behaviors associated with drug withdrawal and increase the reinforcing effects of substances of abuse.

KOR Antagonism

        Much of the current knowledge of the kappa opioid system comes from studies of two prototypical KOR antagonists, nor-BNI and JDTic. In studies, such as those discussed by Lalanne et al. in a paper titled The Kappa Opioid Receptor from Addiction to Depression and Back and published in Frontiers in Psychiatry in 2014, KOR antagonists induced antidepressant-like effects in animal models and attenuate symptoms associated with withdrawal, such as anxiety behaviors. The therapeutic potential of KOR antagonism has been demonstrated in animal models of anhedonia, depression, and anxiety, and KOR antagonists reduce the signs of nicotine, heroin and alcohol withdrawal in rodent models of dependence. Based on the results of these studies, stress-induced reinstatement to drug seeking is blunted in mice who have their KOR system genetically deleted, and can also be blocked in wild-type

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mice by treatment with nor-BNI and rats treated with JDTic. Based on the studies summarized by Lalanne et al., KOR antagonists reduce ethanol intake in a number of animal models. Overall, we believe the preclinical data to date support the emerging consensus that selective kappa opioid antagonists have antidepressant- and antianxiety- like effects, reduce addictive substance consumption, and reduce behaviors and signs of drug withdrawal. As these studies demonstrate efficacy in animal models of both mood and addictive disorders, we believe that these studies provide the basis for the use of KOR antagonists in mood and substance use disorders and have the potential to reduce co-morbid mood disorders.

        We believe that the rationale for CERC-501 as an adjunctive treatment of MDD is supported by the reported results for Alkermes' ALKS-5461, which is believed to be acting as a functional kappa antagonist. Alkermes has reported positive Phase 2 results for ALKS-5461 as an adjunctive antidepressant in MDD patients and has initiated a Phase 3 development program. According to a press release by Alkermes, "ALKS 5461 had an onset of effect, as measured by MADRS, evident after one week of treatment." This suggests a rapid response to antidepressant treatment but not as rapid as what has been reported in the ketamine depression clinical trials.

Our Solution

        In February 2015, we acquired rights to CERC-501, which was previously referred to as LY2456302 and OpRA Kappa, through an exclusive, worldwide, license from Eli Lilly and Company, or Lilly. CERC-501 is a high-binding, selective KOR antagonist. We believe that the availability of a highly selective, potentially well tolerated oral daily kappa antagonist like CERC-501 represents a unique drug development opportunity for substance use disorders, adjunctive treatment of MDD and potentially for co-occurring disorders. We believe CERC-501 may have the following advantages over conventional antidepressant and addiction therapies:

    highly specific and selective to KOR and, therefore, minimal off-target pharmacology;

    available in convenient, once-a-day oral dosing;

    rapid onset of action;

    potential efficacy against substance use disorders;

    potential efficacy against mood disorders; and

    potential ability to treat co-occurring disorders.

        In the long term, we currently intend to target our development efforts at the treatment of co-occurring disorders, an under-served segment of patients. We believe competitively positioning CERC-501 as a treatment for substance use disorders, a once-a-day, oral adjunctive treatment of MDD, and, depending on marketing approval, a treatment for co-occurring disorders it has the potential to generate widespread market acceptance. We further believe that if CERC-501 has the ability to provide rapid onset of antidepressant effect, the market opportunity will be further expanded. As discussed below, we plan to leverage the external studies funded and conducted by third parties with our own internally funded clinical studies.

Our Program

Current Development Plan

        Our long term strategy is to develop CERC-501 as an adjunctive treatment of MDD, substance use disorders, and, depending on market approval, the treatment of co-occurring disorders. For approximately the next 24 months, we will evaluate the potential human utility of CERC-501 in smoking dependence, depression, cocaine dependence, and anhedonia and mood disorders based upon studies conducted by us and three studies conducted by third parties at academic centers, two of which are being conducted under the auspices of NIMH. We will be submitting the smoking study to the

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FDA, which we refer to as Clin501-201 in the third quarter of 2015 and initiate the study in first half of 2016. In addition we are considering conducting a Phase 2 clinical study in inadequately treated subjects with MDD currently on antidepressants, with an initiation date in the second half of 2016.

        Study Clin501-201:    A Randomized, Double-Blind, Placebo-Controlled, Crossover Design Study of CERC-501 in a Human Laboratory Model of Smoking Cessation.

        Study Overview:    Clin501-201 is designed as a randomized, placebo-controlled double blind cross-over human laboratory study to evaluate the effects of 5 mg and 10 mg of CERC-501 on tobacco withdrawal and reinstatement and assess craving, mood and anxiety during 18 hours of abstinence in approximately 86 cigarette smokers who currently smoke at least 15 cigarettes per day. Clin501-201 uses a placebo and a crossover design with two periods. We believe that the cross-over design, by allowing for subjects to be their own control, significantly increases trial power as does the conduct of the study in a controlled laboratory environment.

        Study Design:    Clin501-201 consists of two periods. After the screening period of up to 21 days, subjects will be randomized in a 1:1 manner to one of two treatment regimens, 5 mg or placebo, or 10 mg or placebo. Each period consists of a seven day treatment period followed by a single testing day on Day 8. Subjects will participate in a laboratory session following the McKee Smoking Lapse Test and will be discharged from the clinic to undergo drug washout followed by the second period of the cross-over design. The McKee Smoking Lapse Test involves nicotine deprivation for 18 hours, beginning on the evening of the seventh day, and continuing to mid-day of on the eight day, followed by a delay period, 50 minutes in duration, and a self-administration period, 60 minutes in length, as described in more detail below. After screening, participants will be randomized to arm 1, consisting of placebo and 5 mg CERC-501, or arm 2, consisting of placebo and 10 mg CERC-501. Half of the participants in each arm will be randomized to receive placebo first and half will receive CERC-501 first.

        The smoking lapse test involves assessment of tobacco craving, mood ratings and nicotine withdrawal after 18 hours of abstinence followed by the delay period where subjects are presented with a tray containing their preferred brand of cigarettes, a lighter, and an ashtray. Subjects will be instructed that they can begin smoking at any point over the next 50 minutes. However, for each five minute block of time a subject delays smoking, the subject will receive a financial reward. The time will be recorded when a subject announces that the subject wants to smoke. After their first cigarette or the completion of the delay period, a standardized scale known as the modified Cigarette Evaluation Questionnaire (mCEQ), will be administered to assess satisfaction, psychological reward, craving relief, enjoyment of airway sensations and other subjective effects associated with smoking. Upon smoking the first cigarette or completion of the delay period, the smoking self-administration period begins, and lasts 60 minutes. Subjects will be provided with eight cigarettes of their preferred brand. Money earned for delaying smoking will be paid to the subjects at the end of each laboratory session. The number of cigarettes smoked will be recorded. The primary endpoints for the study are the number of minutes (latency) to start of tobacco use during the delay period and the number of cigarettes smoked during the self-administration period.

        Upon completion of the McKee Smoking Lapse Test, subjects will be discharged and begin a seven day washout period, although a three day window has been included to allow for subjects to remain in the study if they have an emergency or a planned vacation or other activity that would not allow them to make the exact visit date. Subjects will then return to the clinic to begin the second period of the cross-over design to receive placebo or active, with 5 mg or 10 mg, respectively, and repeat the above procedures and assessments. Upon discharge from the unit after the second period, subjects will be instructed to return for a final follow-up visit seven days later.

        Enrollment Strategies:    The study will be performed in volunteer subjects who are cigarette smokers currently not seeking treatment, who currently smoke at least 15 cigarettes per day, and smoke within five minutes of awakening every day. Recruitment is planned to be primarily through advertising.

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Subjects will be compensated for their participation in the study. The study will be performed at up to four sites that will contribute to enrollment. Strategies that we believe may maximize retention include dividing the screening procedures into two separate visits that allow the site to meet with subjects on unique occasions and gain an understanding of their reliability and commitment to the study before randomizing.

    Overview of Externally Funded and Conducted Studies

        In connection with our in-license of CERC-501 from Lilly, we expect to receive the results upon the completion of three clinical trials that are enrolling subjects or will begin enrolling subjects by the end of the end of 2015. All of these studies are funded by grants from the NIMH or self-funded without any cost to us. The following is a summary of each of the three clinical trials:

    Impact of the KOPr Antagonist OpRA Kappa in Persons at Specific Stages of Cocaine Addiction Trajectory, Versus Normal Volunteers.  This single site study, which began in September 2014, is being conducted under the leadership of Mary Jeanne Kreek, MD, Professor and Head of Laboratory, The Rockefeller University, and Senior Physician, The Rockefeller University Hospital.

    Double-Blind, Placebo Controlled, Proof-of-Concept (POC) Trial of LY2456302, a Kappa Selective Opioid Receptor Antagonist, and Augmentation of Antidepressant Therapy in Treatment-Resistant Depression.  The primary investigator for this 5-site study, which has begun to recruit subjects, is Maurizio Fava, MD, Executive Director, MGH Clinical Trials Network and Institute and Executive Vice-Chair, Department of Psychiatry, Massachusetts General Hospital.

    A Phase 2a Study to Evaluate the Kappa Opioid Receptor As a Target for the treatment of Mood and Anxiety Spectrum Disorders by Evaluation of Whether LY2456302 Engages Key Neural Circuitry Related to the Hedonic Response.  Dr. Andrew Krystal of Duke University Medical Center serves as the principle investigator of this 6 site study, which is expected to begin by the end of 2015.

        Under clinical research agreements between Lilly and the third party research institutions conducting each of the clinical trials listed above, Lilly has the right to receive the results of each clinical trial. We are in the process of entering into tri-party agreements with Lilly and each third-party research institution so that we may be assigned the clinical research agreements. We have executed a tri-party agreement with Duke University and Lilly whereby we are assigned all of Lilly's rights and obligations under the clinical research agreement with Duke University. We are pursuing a similar agreement with MGH Clinical Trials Network and Institute and plan to propose a similar arrangement with The Rockefeller University Hospital.

        In addition, there was a previously planned Phase 1 study of CERC-501 receptor occupancy to be conducted by Dr. Andrew Krystal of Duke University Medical Center and funded by NIMH. NIMH recently decided to discontinue the funding as it decided that the study would be unlikely to provide new information beyond what the above discussed NIMH funded Phase 2a study will provide. Depending on the results of Phase 2 studies for CERC-501, we may consider sponsoring this study or supporting the conduct of this study by a third party.

Summary of Prior Preclinical and Clinical Studies

    Phase 1 Studies

        In 2008 through 2011, three Phase 1 clinical trials of CERC-501 in an aggregate of 82 healthy volunteers were completed by Lilly, each of which measured the safety and assessed the PK and PD of CERC-501. Study A was the first-in-human study of single escalating oral doses of CERC-501 administered to 32 healthy subjects and provided safety and PK data. The second study, Study B, assessed repeated daily doses of CERC-501 in 37 healthy subjects utilizing a dose range based on the results of Study A. Potential PK and cognitive interactions between CERC-501 and alcohol were also

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investigated in Study B. Study C was conducted in 13 healthy male subjects to confirm the interaction of single oral doses of CERC-501 of between 0.5 mg to 25 mg with KORs in the brain, using positron emission tomography, or PET, imaging. The combined results of Studies A and C identified the doses at which CERC-501 provides KOR inhibition without mu opioid receptor, or MOR, inhibition, thus confirming the doses at which the drug remains KOR selective. The combined results from Study A and Study B suggested that CERC-501 was generally well tolerated by the healthy subjects administered up to 60 mg as a single dose, and up to 35 mg as multiple doses administered once daily for 14 days. One subject in Study B experienced a transient, clinically significant increase in ALT (liver transaminase) approximately two weeks after her last dose of 10mg of study drug. There were no serious adverse events observed in either study that were attributed to the study drug and no dose-limiting adverse events or other safety variables that were attributed to the study drug. The dose escalations in both studies were not limited by any safety findings. There were no clinically significant changes in neurohormones, including cortisol, prolactin, adrenocorticotropic hormone, and luteinizing hormone in either studies, consistent with pre-clinical toxicology studies that revealed no evidence of hypothalamic or pituitary hormonal toxicities. The estimated PK parameters after single doses of CERC-501 were reasonably consistent across both studies. In Study B, CERC-501 had no effect on ethanol-induced cognitive/motor impairment.

        In Study C, PET imaging was conducted and demonstrated that single oral doses of 0.5 mg to 25 mg of CERC-501 blocked KOR in the brain. KOR occupancy, or RO, was measured in high uptake regions of the brain, including amygdala, anterior cingulate, frontal cortex, and insula, at two time-points post-dose, approximately 2.5 hours post-dose and on the second day at around 22.5 hours post-dose. Consistent with preclinical studies, single oral doses of CERC-501 demonstrated rapid penetration and potent receptor occupancy in healthy human subjects, with 74% to 100% KOR occupancy at doses of 2 mg to 25 mg. Study C demonstrated that a single oral dose of 10 mg CERC-501 almost completely saturated kappa receptors at 2.5 hours post-dose, and that the lower range of RO at 22.5 hours post-dose exceeded 60%, supporting the clinical exploration of doses < 10 mg in future studies. Overall, clinical studies to date demonstrate that CERC-501 selectively blocks KOR without evidence of significant MOR antagonism within the dose range of 4 mg to 10 mg in humans, and the studies also suggest such dose levels may present a favorable safety profile. A limited number of the adverse effects observed in Studies A, B and C were considered by the investigators to be related to CERC-501. Additionally, there were no clinically significant changes in vital signs or electrocardiogram in the studies attributed to the study drug.

    Preclinical Studies

        Completed preclinical studies of CERC-501 include the evaluation of safety pharmacology, PK and toxicology of CERC-501 in conscious animals, all of which have demonstrated a safety profile sufficient at the intended dose to enable ongoing and planned human clinical studies. Our preclinical studies have revealed some limited safety findings, such as rat gastrointestinal issues, which we are further investigating. The engagement of CERC-501 with brain KORs, or target engagement, has also been demonstrated in rats and monkeys and the sufficient blood exposure required to achieve target engagement has been described in these species. To date, two preclinical studies in nicotine withdrawal, one in depression, and two in alcohol dependence have demonstrated efficacy, two of which are described below.

        A standardized model of nicotine dependence involves infusion of nicotine via an attached pump into mice, discontinuation of the infusion is representative of spontaneous nicotine withdrawal. CERC-501, administered at doses ranging from 1 to 10 mg/kg reduced nicotine withdrawal behaviors in a dose-related manner, achieving statistical significance at 10 mg/kg. CERC-501 non-significantly decreased hyperalgesia at all doses tested and non-significantly decreased anxiety-like behavior in nicotine-withdrawn mice at 3 and 10 mg/kg. In a FST study, CERC-501 reduced swimming immobility,

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a measure of depression-like behavior in a dose-dependent manner, with 10 mg/kg achieving efficacy comparable to the tricyclic antidepressant imipramine.

    Future Clinical Development

        Upon completion of Clin501-201, provided the results are indicative of potential efficacy and safety, we plan to conduct a dose ranging Phase 2b study in nicotine dependent smokers. In addition we are considering conducting a Phase 2 clinical study in inadequately treated subjects with major MDD currently on antidepressants. We will also monitor the results from the three externally funded and conducted future studies and based on the outcome of those clinical trials determine the merits of pursuing indications for adjunctive treatment of MDD, substance use disorders, and, depending on marketing approval, the treatment of co- occurring disorders. We also plan to engage the FDA in an end-of-Phase 2 meeting to align plans and activities for potential regulatory approval which would include Phase 3 clinical studies, non-clinical NDA enabling studies and manufacturing activities.

COMTi Platform

        In March 2013, we acquired rights to our COMTi platform by means of an exclusive, worldwide license from Merck. COMT is an enzyme that is critical for the inactivation and metabolism of dopamine and its inhibition in the brain has demonstrated applicability in treating subjects with neuropsychiatric conditions, including MDD, schizophrenia, Parkinson's disease and pathological gambling. The COMTi platform includes access to a library of approximately 1,800 compounds that we believe increase dopamine levels in the prefrontal cortex, or PFC, which is the region of the brain that is responsible for working memory, attention tasks and decision making, all of which are human attributes that we collectively refer to as executive function. In January 2015, we selected CERC-406 as our first preclinical lead candidate from the COMTi platform. In 2015 and 2016, we intend to establish the data set necessary to select additional preclinical lead candidates and to initiate programs for treatment of various conditions where impaired executive function is a core symptom. These programs will target the improvement of working memory and executive function, which are key components of cognition.

COMT Overview

        We believe the neurotransmitter systems that are involved in executive function are targets for drug development, and include acetylcholine, serotonin, dopamine, glutamate and histamine. Most of these targets have a wide ranging impact on different brain functions or areas, and, as such, most drug development efforts are fraught with the lack of specificity of clinical effect of the drugs tested. On the other hand, higher-order cognitive functions, which impact areas such as thought, are governed by dopamine in the PFC. COMT is thought to break down dopamine and regulate dopamine levels in the PFC and we believe that brain COMT inhibition is a preferred target for treatment of cognitive impairment in conditions where loss of executive function is a key symptom. Specifically, COMT inhibition has demonstrated applicability in the significant improvement of aspects of executive function in persons suffering from schizophrenia, Parkinson's disease and pathological gambling.

        We believe brain COMT inhibition is a target with two key attributes that enable drug development—genetic variability and the availability of biomarkers. A genetic variation in the COMT enzyme, the Val allele, enhances the enzyme's baseline level activity and has been shown to be linked to reduced aspects of executive function in normal volunteers and in disorders associated with cognitive impairment. Research has suggested that the Val allele may be linked to reduced working memory and PFC physiological efficiency as assessed through brain imaging and increased response to a currently available COMT inhibitor, tolcapone. We believe these results suggest that COMT inhibition may improve PFC executive function in a genotype-specific and more predictable manner. This represents an opportunity to improve cognitive symptoms in patients with various diseases associated with executive dysfunction and who carry this genetic subtype. Support of this concept of stratification of

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subjects by genotype, or pharmacogenomic approach, is found in a 2013 article titled A Proof of Concept Study of Tolcapone for Pathological Gambling: Relationships with COMT Genotype and Brain Activation, which demonstrated that this genotype is predictive of response to brain COMT inhibition. As indicated in the figure below, in this study of pathological gambling, the Val:Val subjects had a significantly improved response when compared to the Met/Met genotypes. By targeting this genotype, we believe we could see a significant improvement in magnitude and reliability of drug response.

GRAPHIC

        The second attribute involves the use of biomarkers to monitor the level of enzyme inhibition by our novel COMT inhibitors. In cerebrospinal fluid, or CSF, the inhibition of COMT leads to an increase in the amounts of dihydroxyphenylacetic, or DOPAC, and a decrease in the amounts of homovanillic acid, or HVA. Samples of CSF are easily obtained in clinical studies via a spinal tap, or lumbar puncture, to measure concentrations of HVA and DOPAC. This allows for immediate measures of central dopamine breakdown. We plan to use these biomarkers in our first clinical trials in order to detect clinical efficacy in Phase 1. By exploiting this biomarker strategy and combining it with a pharmacogenomic approach, we are developing our novel COMT inhibitors as one of the first hypothesis-driven, biology-based, genotype-specific and targeted treatments of the impairment of executive function.

GRAPHIC

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Our COMTi Platform

        Our COMTi platform is comprised of a new generation of compounds with selectivity for membrane bound COMT, the dominant form of COMT found within the central nervous system. We believe these potent COMT inhibitors will selectively increase dopamine levels in the PFC, thereby improving executive function. Our development efforts are focused on a new generation of potent inhibitors that we believe avoid off-target toxicity and side effects seen with the previous generation of inhibitors, such as liver toxicity observed in tolcapone and diarrhea observed with entacapone and tolcapone. Our novel compounds are intended to have higher levels of penetration and selectivity for brain COMT, which we believe may lead to higher efficacy with lower administered doses. Our research indicates that our COMTi platform includes compounds with varying degrees of selectivity of peripheral versus brain COMT inhibition, including some that work on both peripheral and brain COMT, and some that work primarily on brain COMT. We believe this provides options for developing different compounds for different disease states. For example, we believe a COMTi for Parkinson's disease may need to provide both central and peripheral inhibition, in order to benefit both to the movement impairments of Parkinson's disease and the cognitive symptoms of the disease.

CERC-406

Residual Cognitive Symptoms in Major Depressive Disorder

        Depression is one of the most common serious medical and psychiatric disorders, with greater than 150 million adults worldwide suffering from MDD at any given time, according to the WHO report titled Investing In Mental Health. According to the NCS-R, more than 16 million adults in the United States, which represents approximately 6.7% of its entire adult population, will suffer from a MDD in a 12 month period. The WHO, in a report titled Depression: A Global Crisis, published on the occasion of World Mental Health Day, October 10, 2012, predicted that by 2020 MDD would be the second leading cause of disability worldwide.

        Several publications including the 2014 article by Lam et al., titled Cognitive Dysfunction in MDD: Effects on Psychosocial Functions and Implications for Treatment published in the Canadian Journal of Psychiatry indicate that cognitive dysfunction is an important mediator of disability in MDD. Self-perceived cognitive impairment has always been recognized as a clinical manifestation of MDD. Cognitive domains that are measurably impaired in MDD include attention, memory, processing speed and executive function. As discussed by Lam et al., up to 50% of patients with MDD exhibit measureable cognitive deficits. Deficits in attention and executive function may persist even after remission. Cognitive dysfunction and functional impairments are two of the most common residual complaints among patients with MDD who achieve symptomatic remission. In a study of patients with MDD treated with antidepressants for at least three months who were considered to be be in partial or complete remission, 30% to 50% reported residual cognitive symptoms that interfered with functioning. Thus, we believe cognitive dysfunction may represent a dimension of MDD that is independent of mood symptoms. Although standard antidepressants may improve cognitive deficits in MDD, we believe these effects may be limited in magnitude. Furthermore, as summarized in a 2009 article by Delgado and Schillerstrom titled Cognitive Difficulties Associated with Depression published in Psychiatric Times there is preliminary evidence indicating that cognitive deficits in MDD patients may predict the failure to respond to antidepressants. We believe there is a subgroup of patients exist who require additional treatment alternatives. According to Lam et.al, accumulating clinical evidence suggests that cognitive dysfunction is a core psychopathological feature of the disorder.

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        Entacapone and tolcapone are two commercially available COMT inhibitors used to treat aspects of Parkinson's disease. Both drugs inhibit COMT outside of the nervous system, or peripheral COMT, and may be administered, with levodopa, which is the precursor to the neurotransmitter dopamine, multiple times per day. Tolcapone, which has modest brain penetration and inhibits brain COMT, is hampered by side effects including diarrhea and liver toxicity. Entacapone does not penetrate the brain. Because of these factors, neither drug is used clinically to treat executive function impairment. Nonetheless, pilot studies using tolcapone have repeatedly suggested an improvement in aspects of executive function in normal volunteers and in subjects with various conditions that are associated with cognitive impairment. Improvements in aspects of the underlying conditions were also found. In an open-label study published by Dr. Maurizio Fava and others in 1999 entitled Open Study of the Catechol-O-Methyltransferase Inhibitor Tolcapone in Major Depressive Disorder, tolcapone significantly improved core depressive symptomatology, including HAMD-17 scores, in a cohort of 21 adult subjects with MDD.

Our Solution

        CERC-406 is a small molecule, that research indicates is a selective COMT inhibitor with low inhibitory activity on peripheral COMT. We are currently planning to develop CERC-406 as a "first-in-class," oral adjunctive medication for patients with residual cognitive impairment symptoms suffering from MDD. We selected CERC-406 as our preclinical lead candidate from our COMTi platform because in preclinical testing it demonstrated lower potential of peripheral, off target side effects, rapid absorption and bioavailability, good brain penetration and a favorable dose-dependent biomarker profile in rats. CERC-406 has also demonstrated off-rate on brain COMT that is slower than tolcapone, implying a good duration of effect. Finally, CERC-406 has demonstrated a favorable safety profile in all studies conducted to date. In preliminary studies it appears that CERC-406 may have favorable drug distribution and metabolism properties, suggesting that it has the potential to be administered orally on a once or twice daily basis.

        We believe that CERC-406 will:

    demonstrate efficacy as it is a brain penetrant COMT inhibitor with selectivity for MB-COMT to target the PFC dopamine deficit in this patient population;

    be more effective in Val homozygotes population, who have higher levels of COMT activity and lower prefrontal dopamine receptor activation; and

    be safer than existing COMT inhibitors—existing COMT inhibitors are not ideal as such inhibitors have adverse events such as liver toxicity and diarrhea.

Our Program

        We are planning to develop CERC-406 for the enhancement of executive function and working memory in MDD, where we believe a new therapy with efficacy in residual cognitive symptoms will be associated with improved functional outcomes. We may also perform early exploratory clinical studies in subjects with high unmet medical needs, such as individuals with depression, schizophrenia, impulse control disorders or Parkinson's disease. While COMT inhibition may eventually find broad use in multiple neurological and psychiatric diseases, we plan to focus on indications where high COMT activity is known to contribute to the disease process and where the Val:Val genotype has already been identified as a vulnerable population in the condition or disease state. We intend to measure the biomarkers of COMT activity and dopamine metabolism in genetically defined cohorts in our initial human studies, thus providing biological proof of concept and dose response data early in clinical development. By exploiting this biomarker strategy and combining it with a pharmacogenomic approach, we are developing our CERC-406 as one of the first hypothesis-driven, biology-based, genotype-specific and targeted treatments of the impairment of executive function.

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    Current Development Plan

        In 2015 and 2016, as part of our pre-IND efforts, we intend to advance the characterization of the safety and efficacy of CERC-406 in pre-clinical animal studies and to advance manufacturing of product for clinical trials. We plan to file an IND for CERC-406 in the first half of 2017. Upon acceptance of this IND filing, we will commence Phase 1 studies to examine human safety, tolerability and pharmacokinetics that will determine suitability for further development. Subsequently, other compounds can be brought into development to target other cognition-related disorders. Alternatively, CERC-406 could be carried forward to target other conditions.

    Summary of Preclinical Studies

        Preclinical studies on CERC-406 to date have been focused towards demonstration of an acceptable safety, metabolic, and toxicity profile for CERC-406, deeming it qualified for further development and advancement into IND-enabling studies. Preclinical medicinal chemistry synthetic scale-ups, a series of studies related to absorption, distribution, metabolism, excretion, PK characterizations, safety screening for liver toxicity, and target validation with use of cerebrospinal fluid biomarker measurement in rats as proof of concept all have provided supporting data for advancement of CERC-406 towards IND-enabling studies.

    Clinical Development Plan

        Upon acceptance of CERC-406's IND filing, we will commence Phase 1 studies to examine human safety, tolerability and pharmacokinetics that will determine suitability for further development. Current development with respect to CERC-406 allows us to measure the biomarkers of COMT activity in genetically defined cohorts in our initial human studies, thus providing biological proof of concept and dose response data early in clinical development.

    Other Business Development Activities

        From time to time we may consider strategic transactions, such as acquisitions of companies, asset purchases and in-licensing of products, product candidates or technologies. Additional potential transactions that we may consider include a variety of different business arrangements, including strategic partnerships, collaborations, joint ventures, business combinations and investments. We believe we have the ability to identify, evaluate and procure valuable product programs that are consistent with our goal of becoming a leader in the development of innovative drugs that make a difference in the lives of patients with neurological and psychiatric disorders. We plan to continue to leverage these opportunities to expand our product candidate portfolio in a fashion that fits within our core strategy and enhances our overall value.

Intellectual Property

        We strive to protect the proprietary technologies that we believe are important to our business, including seeking and maintaining patent protection intended to cover the composition of matter of our product candidates, their methods of use, related technology and other inventions that are important to our business. As more fully described below, we have issued patents covering the compounds and compositions of CERC-301 and CERC-501. We have also filed multiple patent applications directed to COMT inhibitor compounds and methods of use. In 2014 and 2015, we received Notices of Allowance for two U.S. patent applications that broadly and/or specifically cover current compounds of interest within the COMTi Platform, including CERC-406. Both of the allowed U.S. applications issued as patents in 2015. We also may rely on trade secrets and careful monitoring of our proprietary information to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection.

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        Our success will depend significantly on our ability to obtain and maintain patent and other proprietary protection for commercially important technology, inventions and know-how related to our business, defend and enforce our patents, maintain our licenses to use intellectual property owned by third parties, preserve the confidentiality of our trade secrets and operate without infringing the valid and enforceable patents and other proprietary rights of third parties. We also rely on know-how, continuing technological innovation and in-licensing opportunities to develop, strengthen, and maintain our proprietary position in the field of central nervous system disorders.

        The patent positions of biopharmaceutical companies are generally uncertain and involve complex legal, scientific and factual questions. In addition, the coverage claimed in a patent application can be significantly reduced before the patent is issued, and its scope can be reinterpreted after issuance. Consequently, we do not know whether any of our product candidates will be protectable or remain protected by enforceable patents. We cannot predict whether the patent applications we are currently pursuing will issue as patents in any particular jurisdiction or whether the claims of any issued patents will provide sufficient proprietary protection from competitors. Any patents that we hold may be challenged, circumvented or invalidated by third parties.

        Because patent applications in the United States and certain other jurisdictions are maintained in secrecy for 18 months, and since publication of discoveries in the scientific or patent literature often lags behind actual discoveries, we cannot be certain of the priority of inventions covered by pending patent applications. Moreover, we may have to participate in interference proceedings declared by the United States Patent and Trademark Office, or USPTO, or a foreign patent office to determine priority of invention or in post-grant challenge proceedings, such as oppositions, that challenge priority of invention or other features of patentability. Such proceedings could result in substantial cost, even if the eventual outcome is favorable to us.

        The patent portfolios for our most advanced programs are summarized below.

    CERC-301.  We possess worldwide exclusive rights to manufacture, use and sell certain NR2B antagonist compounds. The CERC-301 patent portfolio consists of three patent families. The first family consists of patents that have issued in the United States, Australia, Canada, Germany, France, Great Britain, Switzerland and Japan. The patents in the first family include composition of matter and use claims of varying scope, including picture claims to CERC-301 or a pharmaceutically acceptable salt thereof. The expiration date of the U.S. patent in the first family is August 31, 2026, not including any patent term extension or market exclusivity period which may apply. The second family consists of patents that have issued in the United States, Germany, France and Great Britain. The patents in the second family include composition of matter claims (in U.S. patent only) and use claims that generically cover CERC-301. The expiration date of the U.S. patent is June 3, 2022, not including any potential patent term extension or market exclusivity period. The third family consists of a U.S. provisional patent application which includes claims to compositions of matter, methods of use, and methods of manufacture. U.S. nonprovisional and international patent applications that claim priority to the provisional application are expected to be filed by December 2015. Any patent issuing from any such U.S. nonprovisional application is predicted to expire in 2035 at the earliest, not including any potential patent term extension or market exclusivity period.

    CERC-501.  We possess worldwide exclusive rights to manufacture, use and sell certain KOR antagonist compounds. The CERC-501 patent portfolio consists of a single patent family with dozens of issued patents and pending patent applications, including patents issued in the U.S., Australia, Canada, China, Europe and Japan. The patents in this family include composition of matter claims, including picture claims to CERC-501 or a pharmaceutically acceptable salt thereof, and/or use claims of varying scope. The expiration date of the two U.S. patents is January 13, 2029, not including any potential patent term extension or market exclusivity period.

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    CERC-406 and COMTi Platform.  We possess worldwide exclusive rights to manufacture, use and sell COMT inhibitor compounds. The COMT patent portfolio includes three patent families. Each patent family consists of patent applications filed in the United States, Australia, Brazil, Canada, China, Europe, India, Japan, South Korea, Mexico and Russia. Any patents issuing from these patent applications are predicted to expire at the earliest in 2031, not including any potential patent term extension or market exclusivity period. In 2014 and 2015, we received Notices of Allowance for two U.S. patent applications that broadly and/or specifically cover current compounds of interest within the COMTi Platform, including CERC-406. Both of the allowed U.S. applications issued as patents in 2015.

    FP01.  On March 17, 2015, we provided notice to Johns Hopkins University that we were terminating the exclusive, worldwide license to develop and market FP01 in chronic, persistent cough. Such termination will be effective on June 15, 2015 and, thereafter, we will no longer have any rights to the previously-licensed intellectual property concerning FP01.

        The term of any individual patent depends upon the legal term of the patents in the countries in which they are obtained. In most countries where we file, the patent term is 20 years from the earliest date of filing a non-provisional patent application.

        In the United States, the patent term of a patent that covers an FDA-approved drug that contains an active ingredient or salt or ester of the active ingredient that has not previously been marketed may also be eligible for patent term extension, which permits patent term restoration to account for the patent term lost during the FDA regulatory review process. The Hatch-Waxman Act permits a patent term extension of up to five years beyond the expiration of the patent. The length of the patent term extension is based upon one half of the time between the IND effective date and a company's initial submission of a marketing application, plus the entire time between the submission of the marketing application and the FDA's approval of the application. Patent extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval and only one patent applicable to an approved drug may be extended. Similar provisions are available in Europe and other non-United States jurisdictions to extend the term of a patent that covers an approved drug. In the future, if and when our product candidates receive FDA approval, we expect to apply for patent term extensions on patents covering those product candidates. We intend to seek patent term extensions to any of our issued patents in any jurisdiction where these are available, however there is no guarantee that the applicable authorities, including the FDA in the United States, will agree with our assessment of whether such extensions should be granted, and even if granted, the length of such extensions.

        For all of our product candidates, we intend to explore at each stage of the drug discovery process opportunities for follow-on patent filings to maximize patent terms and market exclusivities. Such follow-on patent filings may be directed to new indications, formulations, combination therapies, manufacturing methods, dosages, routes of administration, patient populations, contraindications, drug interactions (or absence of interactions) or other aspects of drug labels.

        We also rely on trade secret protection for our confidential and proprietary information. Although we take steps to protect our proprietary information and trade secrets, including through contractual means with our employees and consultants, third parties may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets or disclose our technology. Thus, we may not be able to meaningfully protect our trade secrets. It is our policy to require our employees, consultants, outside scientific collaborators, sponsored researchers and other advisors to execute confidentiality agreements upon the commencement of employment or consulting relationships with us. These agreements provide that all confidential information concerning our business or financial affairs developed or made known to the individual during the course of the individual's relationship with us is to be kept confidential and not disclosed to third parties except in specific circumstances. In the case of employees, the agreements provide that all inventions conceived by the individual, and which are related to our current or planned business or research and

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development or made during normal working hours, on our premises or using our equipment or proprietary information, are our exclusive property.

Manufacturing and Clinical Research

        We do not have any manufacturing facilities or personnel. We rely on contract manufacturing organizations, or CMOs, to produce our drug candidates in accordance with applicable provisions of the FDA's current Good Manufacturing Practice, or GMP, regulations for use in our clinical studies. The manufacture of pharmaceuticals is subject to extensive GMP regulations, which impose various procedural and documentation requirements and govern all areas of record keeping, production processes and controls, personnel and quality control.

    CERC-301

        We currently purchase the active ingredient of CERC-301 tablets, which is available from multiple sources, from one supplier. Xcelience currently manufactures the drug product for clinical testing. We intend to identify and qualify multiple manufacturers to provide the active pharmaceutical ingredient, drug product and fill-and-finish services prior to submission of a new drug application to the FDA. In preparation for Clin301-203, we expect to enter into multiple contract service agreements with providers of administrative, data capture, management, monitoring and statistical analysis services relating to our Clin301-203 study. We will remain substantially responsible for overseeing and managing the conduct of the Clin301-203 study in the U.S., with separate agreements with investigative sites performing the study, other clinical research organizations and other third-party vendors.

    CERC-501

        As part of the exclusive license agreement with Lilly, we assumed all accountability and responsibility for existing drug substance, drug product and packaged clinical trial material of CERC-501, as well as all future manufacturing of CERC-501 for development and commercialization. Currently, clinical trial material necessary for supplying the existing studies for CERC-501 are warehoused with one supplier. Almac Group is a provider of a comprehensive range of services extending from research through pharmaceutical and clinical development to commercialization of product. We intend to identify and qualify multiple manufacturers to provide the active pharmaceutical ingredient, drug product and fill-and-finish services prior to submission of a new drug application to the FDA.

        In preparation for Clin501-201, we expect to enter into a master contract services agreement with Vince and Associates Clinical Research, or Vince, under which Vince will provide administrative, data capture, management, monitoring and statistical analysis services relating to our Clin501-201 study. We expect that Vince will be substantially responsible for overseeing and managing the conduct of the Clin501-201 study in the U.S., although we will remain ultimately responsible for the study and will have separate agreements with investigative sites performing the study, other clinical research organizations and other third-party vendors.

        All of our drug candidates are small compounds and are manufactured in reliable and reproducible synthetic processes from readily available starting materials. The chemistry is amenable to scale up and does not require unusual equipment in the manufacturing process. We expect to continue to develop drug candidates that can be produced cost-effectively at contract manufacturing facilities.

License Agreements

Merck CERC-301 License

        In March 2013, we entered into an exclusive license agreement with Merck pursuant to which Merck granted us rights relating to certain small molecule compounds which are known to inhibit or

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antagonize the activity of the NR2B receptor as its primary mechanism of action and any pharmaceutical product containing such compounds, or an NR2B Product, for the prevention, diagnosis and/or treatment of all disease in humans. Merck retained a co-exclusive right to conduct non-human and non-clinical research under patents for the licensed NR2B antagonist compounds and NR2B Products. In addition to the license grant, Merck agreed that for a period of three years from the effective date of the license agreement that it would not, either by itself or through collaboration with a third party, develop, manufacture or commercialize anywhere any product comprising an NR2B antagonist compound.

        In connection with the license grant of certain NR2B antagonist compounds and NR2B Products, we granted Merck a right of first negotiation to obtain an exclusive, worldwide license and/or other worldwide rights to research, develop, commercialize, sell and/or offer for sale any such NR2B Product. Pursuant to such right of first negotiation, we must provide advance notice to Merck if we intend to offer a license of any kind, or to assign or transfer or otherwise convey any other rights related to the development or commercialization of an NR2B Product. If Merck either chooses not to exercise its right of first negotiation or we fail to enter into an agreement with Merck as provided in the agreement, we will be free to enter into negotiations and contract with third parties with respect to such NR2B Product and will have no further obligation to Merck regarding such NR2B Product. In November 2013, we provided notice to Merck of our intent to potentially license or transfer CERC-301 and, after evaluating, Merck ultimately decided not to exercise its right of first negotiation with respect to CEC-301. As a result, pursuant to the terms of the license agreement, Merck no longer has, and we no longer have an obligation to provide, a right of first negotiation to Merck with respect to CERC-301.

        In consideration of the license, we are required to make an initial aggregate payment of $1.5 million. We made an initial payment of $750,000 pursuant to the terms of the license within 45 days of the execution of the license agreement. The balance of the initial payment is due upon the later of (i) FDA acceptance of Merck preclinical data and (ii) FDA acceptance of data from a study that results in the FDA approving a Phase 3 clinical trial for an NR2B Product candidate. For each NR2B Product we develop, we are required to make milestone payments in an amount not to exceed, in the aggregate, $40.5 million upon the achievement of various development and regulatory milestones, including first commercial sale. Additionally, we are required to make sales milestone payments in an amount not to exceed $15.0 million. Upon commercialization of an NR2B Product, we will pay Merck a royalty in the high single digits on net sales of NR2B Product. The royalty obligation will be on a product-by-product and country-by-country basis until the later of (i) the expiration of the last to expire valid patent claim of a patent licensed to us under the license agreement covering the NR2B Product in such country, and (ii) ten years from the first commercial sale of the NR2B Product in such country.

        Our license agreement with Merck will remain in effect on a product-by-product and country-by-country basis until our obligation to pay royalties under the license agreement expire with respect to such product in such country. Upon expiration of the license agreement with respect to a product in a country, our license grant for such product in such country will become a fully paid-up, royalty-free, irrevocable, perpetual non-exclusive license.

        We have the unilateral right to terminate the license agreement in its entirety without cause upon 90 days prior written notice to Merck. Either party may terminate the license agreement in its entirety in the event of an uncured material breach by the other party, upon the other party's filing or institution of bankruptcy, reorganization, liquidation or receivership proceeding or upon an assignment of a substantial portion of its assets for the benefit of creditors. Merck may terminate the license agreement with respect to a particular patent licensed to us if we challenge the validity or enforceability of such patent. If Merck terminates the agreement for cause, or if we exercise our right to terminate the agreement without cause, the rights granted to us under this license will revert to Merck.

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Lilly CERC-501 License

        In February 2015, we entered into an exclusive license agreement with Lilly pursuant to which Lilly granted us rights relating to certain small molecule compounds which are potent and selective kappa opioid receptor, or KOR, antagonists and any pharmaceutical product containing such compounds, or a KOR Product, for the prevention, diagnosis and/or treatment of all disease in humans. In connection with the license grant of certain KOR antagonist compounds and KOR Products, we granted Lilly a right of first negotiation to obtain an exclusive, worldwide license and/or other worldwide rights to develop or commercialize any such KOR Product. Pursuant to such right of first negotiation, we must provide advance notice to Lilly if we intend to offer a license of any kind, or to assign or transfer or otherwise convey any other rights related to the development or commercialization of a KOR Product. If Lilly either chooses not to exercise its right of first negotiation or we fail to enter into an agreement with Lilly as provided in the agreement, we will be free to enter into negotiations and contract with third parties with respect to such KOR Product and will have no further obligation to Lilly regarding such KOR Product.

        In consideration of the license, we are required to make an initial aggregate payment of $1.0 million. We made an initial payment of $750,000 pursuant to the terms of the license within 30 days of the execution of the license agreement. The balance of the initial payment is due 30 days after completion of the final study report for the 9-month toxicology study to be conducted by us in non-human primates. For the first KOR Product we develop, we are required to make milestone payments in an amount not to exceed, in the aggregate, $19.0 million upon the achievement of various development and regulatory milestones, including first commercial sale. Additionally, we are required to make sales milestone payments in an amount not to exceed $30.0 million. Upon commercialization of a KOR Product, we will pay Lilly a tiered royalty on net sales of KOR Product from mid-single digits to low-double digits. The royalty obligation will be on a product by product and country by country basis until the later of (i) the expiration of the last to expire valid patent claim of a patent licensed to us under the license agreement covering the KOR Product in such country, and (ii) eleven years from the first commercial sale of the KOR Product in such country.

        Our license agreement with Lilly will remain in effect on a product by product and country by country basis until our obligation to pay royalties under the license agreement expire with respect to such product in such country. Upon expiration of the license agreement with respect to a product in a country, our license grant for such product in such country will become a fully paid up, royalty free, irrevocable, perpetual non exclusive license.

        We have the unilateral right to terminate the license agreement in its entirety without cause upon 90 days prior written notice to Lilly. Either party may terminate the license agreement in its entirety in the event of an uncured material breach by the other party, upon the other party's filing or institution of bankruptcy, reorganization, liquidation or receivership proceeding or upon an assignment of a substantial portion of its assets for the benefit of creditors. If Lilly terminates the agreement for cause, or if we exercise our right to terminate the agreement without cause, the rights granted to us under this license will revert to Lilly.

Merck COMTi License

        In March 2013, we entered into an exclusive license agreement Merck pursuant to which Merck granted to us certain rights in small molecule compounds which are known to inhibit the activity of COMT as its primary mechanism of action and any pharmaceutical product containing such compounds, or a COMTi Product, in each case for the prevention, diagnosis and/or treatment of all disease in humans. Merck retained a co-exclusive right to conduct non-human and non-clinical research under such patents for certain COMT compounds.

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        In addition to the agreed-upon COMT compounds that are licensed to us, we have the right to request that up to 60 additional COMT compounds be included in our license grant during the two year period after we entered into the license agreement with Merck. Merck may only reject the inclusion of such COMT compound if such COMT compounds meet certain criteria that we have agreed to with Merck in the license agreement. Otherwise, such COMT compounds will be included in our license grant.

        In connection with the license grant of certain COMT compounds and COMT Products, we granted Merck a right of first negotiation to obtain an exclusive, worldwide license and/or other worldwide rights to research, develop, commercialize, sell and/or offer for sale any such COMT Product. Pursuant to such right of first negotiation, we must provide advance notice to Merck if we intend to offer a license of any kind or to assign or transfer or otherwise convey any other rights related to the development or commercialization of a COMT Product. If Merck either chooses not to exercise its right of first negotiation or we fail to enter into an agreement with Merck as provided in the agreement, we will be free to enter into negotiations and contract with respect to such COMT Product with a third party and will have no further obligation to Merck regarding such COMT Product.

        In consideration of the license, we made a $200,000 upfront payment to Merck. For each COMT Product we develop, we are required to pay up to $6.15 million in milestone payments upon achievement of various development and regulatory milestones. Upon commercialization of a COMT Product, we are required to pay Merck a royalty of a low single digit on net sales of a COMT Product. The royalty obligation will be on a product-by-product and country-by-country basis until the later of (a) the expiration of the last to expire valid patent claim of a patent licensed to us under the license agreement covering the COMT Product in such country, and (b) ten years from the first commercial sale of the COMT Product in such country.

        Our license agreement with Merck will remain in effect on a product-by-product and country-by-country basis until our obligation to pay royalties under the license agreement expire with respect to such product in such country. Upon expiration of the license agreement with respect to a product in a country, our license grant for such product in such country will become a fully paid-up, royalty-free, irrevocable, perpetual non-exclusive license.

        We have the unilateral right to terminate the license agreement in its entirety without cause upon 90 days prior written notice to Merck. Either party may terminate the license agreement in its entirety in the event of an uncured material breach by the other party, upon the other party's filing or institution of bankruptcy, reorganization, liquidation or receivership proceeding or upon an assignment of a substantial portion of its assets for the benefit of creditors. Merck may terminate the license agreement with respect to a particular patent licensed to us if we challenge the validity or enforceability of such patent. If Merck terminates the agreement for cause, or if we exercise our right to terminate the agreement without cause, the rights granted to us under this license will revert to Merck.

Commercialization

        We have not yet established a sales, marketing or product distribution infrastructure because our candidates are still in preclinical or early clinical development. We intend to selectively retain commercialization or co-commercialization rights in the United States for CERC-301, CERC-501 and certain indications of our COMTi platform, which we may complement with co-promotion agreements with partners. For those product candidates for which we receive marketing approval, we plan to build a specialty sales force and marketing team as well as to collaborate with third parties to market the approved product candidates in the United States. We may also seek to commercialize any of our approved products outside of the United States, although we only plan to do so with one or more collaborators.

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Competition

        We face, and will continue to face, intense competition from pharmaceutical and biotechnology companies, as well as numerous academic and research institutions and governmental agencies, both in the United States and abroad. We compete, or will compete, with existing and new products being developed by our competitors. Some of these competitors are pursuing the development of pharmaceuticals that target the same diseases and conditions that our research and development programs target. Even if we and our potential collaborators are successful in developing our product candidates, the resulting products would compete with a variety of established drugs in the areas of depression, bipolar depression, post-partum depression, schizophrenia, Parkinson's disease and impulse control disorders, or ICDs.

    CERC-301:

        Our lead product candidate, CERC-301, will compete with other drugs used as adjunctive therapies for the treatment of MDD, such as Abilify, marketed by Otsuka America Pharmaceutical, Inc. and Bristol-Myers Squibb; Seroquel XR, marketed by Astra Zeneca; and buproprion, a generic drug. Furthermore, to our knowledge, there are five competitive rapid onset antidepressant or anti-suicide programs in development:

    Esketamine is in Phase 3 development by Johnson & Johnson, or J&J, for administration as a nasal spray;

    AZD8108 is in Phase 1 development by AstraZeneca Pharmaceuticals LP, for oral administration;

    Rapastinel is approaching Phase 3 development by Naurex Inc., or Naurex, which has recently entered into an agreement to be acquired by Allergan plc, or Allergan for intravenous administration;

    NRX 1074 by Naurex (which has recently entered into an agreement to be acquired by Allergan) has completed a single intravenously administered dose Phase 2 study, which, along with oral and intravenous Phase 1 PK findings, will be used to select an oral dose for a repeat-dose Phase 2 study; and

    ALKS-5461, which is believed to be acting as a functional kappa antagonist, is in Phase 3 development by Alkermes plc, or Alkermes, as an oral application and has shown signals of rapid onset as an adjunctive therapy.

    CERC-501:

        There are no approved pharmacologic treatments for co-occurring disorders even though there are likely more than 5.0 million Americans alone who suffer from co-occurring depression and substance use disorders. Our second Phase 2 product candidate, CERC-501, is being developed with the ultimate goal of treating such co-occurring disorders. To our knowledge, there are no other single moiety selective KOR antagonists in development to date. ALKS 5461, however, is believed to be acting as a functional KOR antagonist that is now in Phase 3 development for MDD as an adjunctive antidepressant in patients with MDD who have no more than two inadequate responses to antidepressant therapy. To our knowledge, the only other competitive program that is being studied in depression and substance use disorders is LY2940094 by Lilly that is in Phase 2 development for the treatment of both MDD and alcohol dependence.

    COMT Inhibitor Platform

        Our potential products for the treatment of schizophrenia would compete with Zyprexa, marketed by Lilly; Risperdal, marketed by J&J; Abilify, Seroquel, and Clozaril. Zyprexa (olanzapine), Risperdal

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(risperidone), Seroquel (quetiapine) and Clozaril (clozapine) are all now generic in the United States. Currently, no treatments are approved for cognitive impairment associated with schizophrenia, although Forum is developing EVP-6124 (encenicline) which is in Phase 3 development by for the treatment of cognitive impairment in schizophrenia.

        Our potential products for the treatment of the cognitive impairment of Parkinson's disease may compete with existing COMT inhibitors Comtan (entacapone), marketed by Novartis Pharmaceuticals Corp., or Novartis, (licensed from Orion), Tasmar (tolcapone), marketed by Valeant, and Stalevo (fixed combinations of entacapone and levodopa/carbidopa), also marketed by Novartis (licensed from Orion). Comtan, Tasmar, and Stalevo are all generic in the United States. Currently, no treatments are approved for cognitive impairment in Parkinson's disease.

        Our potential products for the treatment of ICDs would compete with the off-label use of SSRIs. In addition, the pure opioid antagonist, Revia (naltrexone) is approved for treating alcohol dependence and the blockage of the effects of exogenously administered opioids and is marketed by Teva Women's. The FDA has not approved specific medications in the treatment of ICDs; however, some medications have proven effective, including SSRI antidepressants.

    CERC-406:

        There are no approved pharmacologic treatments for cognitive impairment associated with MDD in the U.S. at this time. In March 2015, vortioxetine (Brintellix®), marketed in the United States by Lundbeck Pharmaceuticals, which was originally developed and commercialized for the treatment of MDD, received a positive opinion from the Committee for Medicinal Products for Human Use of the European Medicines Agency to expand the label to include information for cognitive function in patients with depression. A supplemental application for the addition of clinical data to the FDA approved product label for Brintellix was recently accepted by the FDA for review.

        In addition, the companies described above and other competitors may have a variety of drugs in development or may be awaiting FDA approval that could reach the market and become established before we have a product to sell. Our competitors may also develop alternative therapies that could further limit the market for any drugs that we may develop. Many of our competitors are using technologies or methods different or similar to ours to identify and validate drug targets and to discover novel small compound drugs. Many of our competitors and their collaborators have significantly greater experience than we do in the following: